2 Years On – What Led To The Collapse Of Air Berlin

It is now two years since Air Berlin ceased operations. The airline collapsed on October 27, 2017, following financial issues leading to insolvency.

Air Berlin
Air Berlin struggled to report healthy financials for nearly a decade before collapsing. Photo: Per Aspera ad Astra via Wikimedia Commons

Even though the carrier was founded by an American company named Lelco in 1978, it was eventually sold in 1991 to become a German operation. This sale coincided with the reunification of Germany, following the end of the Cold War, marking a fresh start for aviation in the region.

The beginning of the end

However, after 15 years of operating from Germany, Air Berlin went on a downward spiral. Between 2006 and 2016, the company’s profits continued to slump. While turnover increased each year, thanks to more passengers being served, the costs were too much to handle.

In 2006, Air Berlin reported a respectable €40.1 million ($44.51 million) profit. However, these figures dropped by nearly half to €21 million ($23.31 million) in the following year. The global economic crisis also contributed to the firm’s dire numbers as 2008 gave a negative figure. In this year, Air Berlin reported a loss of €75 million ($81 million).

Air Berlin Aircraft
Air Berlin had hubs at Berlin Tegel Airport and Düsseldorf Airport. Photo: Anna Zvereva via Flickr

Ongoing trend

This would become a familiar feeling for the business as seven of the following eight years saw them in the red. In 2011, Etihad had increased its shares in Air Berlin from 2.99% to 29.1%, giving the Abu Dhabi firm the biggest share among investors.

This gave the airline a glimmer of hope as it reported a profit of €6.8 million ($7.55 million) in 2012. However, this positivity was short-lived, as Air Berlin made a massive loss of €315.5 million ($350 million) in the following year.

Air Berlin Plane
Despite efforts, Air Berlin could not avoid amounting losses. Photo: Pixabay

Inevitable ending

By 2016, Air Berlin was in debt to the tune of €781.9 million ($867.83 million). Etihad, understandably, became frustrated with the situation, and stopped financially supporting the airline. A €150m bridging loan was offered by the German government but this was not enough to save it. Air Berlin was forced to enter insolvency proceedings on August 15, 2017.

Subsequently, a bulk of the airline’s fleet and employees were snapped up by Lufthansa in the month it ceased operations. Quartz reports that the German powerhouse bought 81 of Air Berlin’s aircraft and took on 3,000 of its staff. This move cost Lufthansa €210 million ($248 million) but also helped to further its market share within the region.

Etihad and Air Berlin have since been in a €2 billion ($2.2 billion) lawsuit due to complications of the bankruptcy. Along with this, Air Berlin has been reported as attempting to force passengers to pay for canceled flights after the demise.

Since the fall of Air Berlin, many other European airlines have seen a similar fate. This year, the likes of Thomas Cook, Aigle Azul, and WOW have all ceased operations. Hopefully, there will be a turnaround for carriers as a new decade approaches.

What do you think of the way that Air Berlin collapsed? Let us know your thoughts in the comments.