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Etihad’s global investments in trouble; pulls funding from Air Berlin

Abu Dhabi based Etihad airways is facing a series of blows after it recently pulled funding out of the German airline Air Berlin, following the latter’s continuing losses in the past year. Air Berlin then declared insolvency and filed for administration.

Earlier this year, Etihad had stepped out of the shareholder’s team for Italian airline Alitalia. It later announced a staggering $1.87 bn loss for 2016, pinning $808mn of loss on financial exposure to partner airlines Air Berlin and Alitalia.

Over the past few years, Etihad embarked on an equity-acquisition strategy, that has seen the carrier take substantial ownership stakes in a series of international airlines. This included 49% of Alitalia; 29.2% of Air Berlin; 49% of Air Serbia; 24% of Jet Airways; 21.8% of Virgin Australia; 40% of Air Seychelles; 49.8% of Niki; and 33% of Swiss-based Etihad Regional. Etihad sold its stake in Etihad Regional in July. In September 2016, these partner airlines, along with Etihad Airways and its accompanying subsidiaries, were reconfigured to form Etihad Aviation Group.

Etihad invested nearly €1.7bn in Alitalia and made several injections of funds into Air Berlin, including €250mn in April. That last sum proved insufficient to turn around the ailing German airline however.

“Air Berlin’s business has deteriorated at an unprecedented pace, preventing it from overcoming its significant challenges and from implementing alternative strategic solutions,” said Etihad, in a recent statement. It described Air Berlin’s move to file for administration as “extremely disappointing for all parties.”

Tour operator Thomas Cook, which books some of its customers on flights with Air Berlin and its unit Niki, has expressed interested in restructuring the airline. Deutsche Lufthansa AG said it may buy parts of the German airline, its main national rival.

Etihad Airways is in the midst of finding a new chief executive officer after James Hogan, former president and CEO who led Etihad’s investment and expansion strategy in Europe, stepped down in July. The company is currently led by Ray Gammell who is serving as interim group CEO.

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