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EU gives go signal for German financial assistance for insolvent Air Berlin

Anti-trust regulators of the European Union have given the green light to plans by the German government to provide Air Berlin a temporary bridging loan that is essential to keeping the insolvent carrier operational until it is broken up and purchased to investors.

The loan, which amounts to 150 million euros (178.76 million dollars) would facilitate the “orderly wind-down” of Air Berlin “without unduly distorting competition,” the EU Commission said, making way for the German government’s rescue plan.

Air Berlin, Germany’s second-largest airline, declared last month that it was filing for bankruptcy protection after its main shareholder, Etihad, decided to stop its financing. To alleviate passengers’ worries that they might not be able to fly during summer holiday, the government said it would provide a loan to keep the airline in the air for the time being.

The Commission, which controls EU state aid rules, echored this view, announcing in a statement that the loan is being given with the interests of air travelers in mind.

“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 recommended the state aid under stern conditions, including that the loan will be paid out in installments, and that the airline has to display its liquidity needs on a weekly basis. New installments would only be paid when all existing liquidity has been used. Moreover, the German government would have to guarantee that either the loan will be fully repaid, or Germany will submit a winding down plan for Air Berlin.

In related news, the roster of potential bidders for insolvent Air Berlin has grown after a consortium of Israeli, American and Canadian investors, led by Berlin businessman Alexander Skora, said it was considering a bid for some of Air Berlin’s holiday routes.

Skora, a businessman who acts as a startup financier, said he was examining Air Berlin’s finances 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,” Skora said.

His proposal would see Air Berlin make a 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.

Last week, a report came out stating that Utz Claassen, a former Chief Executive of German utility EnBW, was also weighing a bid for Air Berlin assets with a “highly potent and very reputable international investor.”

Bidders for Air Berlin’s 140 leased aircrafts 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 seen as the main contender for the biggest part of the insolvent airline. EasyJet and Thomas Cook’s Condor are also seen as likely bidders.

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