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EU approves German financial lifeline to insolvent Air Berlin

EU anti-trust regulators have approved plans by the German government to grant Air Berlin a temporary bridging loan which is needed to keep the insolvent airline flying until it's broken up and sold off to investors.

The bridging loan worth 150 million euros (178.76 million dollars) would allow for the "orderly wind-down" of Air Berlin "without unduly distorting competition," the EU Commission ruled Monday, paving the way for the German government's rescue plan.

Air Berlin, Germany's second-largest carrier, said last month that it was filing for bankruptcy protection after its main shareholder, Abu Dhabi-based Etihad, decided to cut its financing. To allay travelers' fears they might be stranded on summer holiday, the government announced that it would provide a loan so the airline could continue flights for the time being.

The Commission, which polices EU state aid rules, shared this view, saying in a statement that the loan would help protect the interests of air travelers. "At the same time, the strict conditions attached to the loan, its short duration and the fact that Air Berlin is expected to cease operations at the end of the process, will reduce to a minimum the distortion of competition potentially triggered by the state support," the statement added.

EU regulators endorsed the state aid under stringent conditions, including that the loan will be paid out in instalments, and that the airline has to demonstrate its liquidity needs on a weekly basis. New instalments would only be paid when all existing liquidity has been used. Moreover, the German government would have to ensure that either the loan will be fully repaid, or Germany will submit a winding down plan for Air Berlin.

Watch video 01:07

Air Berlin break-up poses legal hazards

Bidders circle Air Berlin

Also on Monday, the field of potential bidders for insolvent Air Berlin grew after a consortium of Israeli, American and Canadian investors, headed by Berlin businessman Alexander Skora, said it was weighing a bid for some of Air Berlin's holiday routes.

Skora, who owns a hostel in Berlin and acts as a startup financier, said he was looking at Air Berlin's books and would then decide whether to submit a formal bid for some of its assets.

"I believe strongly that it is possible to continue flying with the basic business with which everything started. I mean routes such as Majorca and other selected destinations," he told the news agency Reuters.

His proposal would see Air Berlin return to its roots as a holiday carrier and pass on long-haul and a number of European destinations to German flagship carrier Lufthansa and Britain's EasyJet.

On Friday, German weekly Der Spiegel already reported that Utz Claassen, a former chief executive of German utility EnBW, was also interested in a bid for Air Berlin assets with a "highly potent and very reputable international investor." In an interview with daily Handelsblatt, Claassen declined to confirm his interest on Monday, citing confidentiality.

Bidders for Air Berlin's 140 leased aircraft and valuable take-off and landing slots must submit offers by a Sept. 15 deadline, with a final decision expected to come on Sept. 21. German flag carrier Lufthansa is hotly tipped as the main contender for the largest part of the insolvent airline. EasyJet and Thomas Cook's Condor are also seen as likely bidders.

Europe's biggest low-cost carrier, Ryanair, said last week it would not submit a bid, and German aviation investor Hans Rudolf Woehrl stepped back from the process on Thursday to search for a partner. Former motor racing driver Niki Lauda said on Sunday he was working on a bid to buy back Air Berlin's Niki unit.

Watch video 01:23

Ryanair withholds bid for Air Berlin

uhe/nz (Reuters, AFP, dpa)

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