I have seen quite a few airline bankruptcies: every major US carrier, including United, Delta and American, has filed for Chapter 11, and most recently, Alitalia (finally) went into administration. But in all of those cases, the reorganization proceeded fairly orderly. In contrast, German airberlin has been in a fast and furious downward spiral since it declared insolvency two weeks ago. At this point, the end seems near and I recommend to not book any tickets on the airline as you have a high risk of loosing your money. You are better of booking elsewhere and wait till competitors pick up the pieces!
Here is a summary of the events of the last week and an outlook of what’s to come:
Route & Flight Cancellations – airberlin has cancelled a number of long-haul routes, for example Berlin – Abu Dhabi. It send a letter to travel agents and partners with rebooking instructions, stating that flights after November 1 will not be rebooked “due to insolvency”. And other long-haul routes, like Berlin – New York, are only available in full-fare, another sign that airberlin does not expect to be around after November 1!
In addition, operational issues have resulted in cancellations of other flights. While airberlin promises to refund – that’s not much of a promise if the airline doesn’t plan on being around to pay the refunds!
topbonus closed for miles earning & redemptions – the rewards program topbonus has stopped all redemptions and miles earning. OneWorld partner airlines have also stopped issuing points for airberlin flights with various effective dates. While the insolvency administration is promising to look for somebody to take over the program, given the timeline of events, the weak balance sheet of topbonus LTD and the lack of interest to continue the business by both owners, airberlin and Etihad, those promises are hollow. Even if, as rumored, another organization would take over the program, it’s unlikely that points would have much value, as they would most likely pay to get their hands on the customer data!
Lounge Access & elite benefits – despite reporting “operation as normal”, that does not seem to include lounge access for business class customers or elite members. A number of lounges have closed access to airberlin travelers, leaving a handful of lounges and “exclusive waiting areas” as well as some OneWorld lounges open to premium travelers.
What’s next? The company has set a deadline for interested parties to submit their bids by September 15th. I have worked as a consultant in mergers and acquisitions and given the complexity of the business, it’s nearly impossible to provide a quality bid in this short a time frame. It appears that the deck is stacked for Lufthansa, who installed one of their own managers as the head of airberlin and has been in discussion for months. The CEO of Ryan Air, O’Leary, has complained loudly about it and the German press has analyzed the German government loan, suggesting that a hasty decision could open the process up to law suits!
A decision meeting for the debtors of airberlin is scheduled for September 21st to review the bids and make a decision! What happens after that is open to speculation: Based on reports in German media, Lufthansa is the leading bidder with interests in more than 90 planes, slots and crews. easyjet is also bidding, most likely for routes that otherwise would result in a monopoly of Lufthansa on domestic and European routes. A third, somewhat unexpected bidder is much smaller Condor, owned by Thomas Cook, who might be interested in a “double digit” number of planes, A possible white knight is previous owner Niki Lauder, who founded Niki Air, now owned by the airberlin group, and has declared interest!
Given the events to date, the upcoming decision meeting and the pressure to complete this quickly, chances are slim that airberlin will continue as a separate airline and will cease to exist by November 1 or even earlier.
What should you do? I’d expect route and flight cancellations to accelerate as the business deteriorates and the inevitable end comes closer. Therefore, purchasing a ticket on airberlin now seems like gambling to me. If you don’t mind a “high risk – small reward” type of gamble, an airberlin ticket purchase might be good for a little adrenalin rush. For anybody else, I recommend to stay away from purchasing any airberlin tickets going forward. If you are unfortunate enough to currently hold an airberlin ticket, like me, you can only wait & hope. If you hold a ticket for a flight in September of October, you still have a chance of flying. If it is beyond November 1, your chances are slim. The best case scenario is that the buyer continues to operate the route of your ticket and will honor it. Everybody else will be out of luck!
Lesson learned for me? After running into issues during the Malaysian Airline bankruptcy and (barely) recovering my funds, it looks like I will loose an international business class ticket this time. While it’s hard to foresee events like this (I sure didn’t expect the Alitalia insolvency to be handled better than the one of airberlin!!), I will be more careful in picking my airlines for flights that are booked well in advance!
While I always have recommended to earn & burn your reward miles and I have burned through most of the miles earned in more than 20 years of business travel, I will make a focused effort to burn the miles and points I still have – they will never be worth as much as they are today!
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