The European governing body has agreed for Germany to provide a temporary loan to enable Air Berlin to continue operations in the coming months and prevent disruption in the EU Single Market.
Air Berlin will receive a loan to continue operations for the next few months after major shareholder Etihad withdrew financial support.
The European Commission (EC) has approved a 150 million euro state aid loan (U.S. $178.6 million) for insolvent airline Air Berlin to prevent “unduly distorting competition in the Single Market,” the European governing body said.
The loan will allow Air Berlin to continue operations in the coming months, with the aim of maintaining its services while it concludes ongoing negotiations to sell its assets, at which point the airline will exit the market, the EC stated.
The loan was initially announced last month following Air Berlin’s main shareholder, Etihad, withdrawing its financial backing for the company. According to the EC, the German public credit institution KfW will provide the funds to Air Berlin over the next months.
The Commission noted that the “loan will be paid out in installments under stringent conditions,” particularly as Air Berlin “has to demonstrate its liquidity needs on a weekly basis and new installments will only be paid when all existing liquidity has been used,” the EC stated.
“Germany committed to ensure that either the loan will be fully repaid, or Germany will submit a winding down plan for Air Berlin,” said the EC. “Rescue and restructuring aid are among the most distortive types of state aid and can only be granted to companies once these have exhausted all other market options.”
The EC’s guidelines allow Member States to aid struggling companies, provided that the public support measures are limited in time and scope and contribute to an “objective of common interest.”