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Aug 16

Airberlin Goes Bankrupt. Should You Still Book Them?

Yesterday, airberlin, the airline known for its somewhat odd frequent flyer program and lack of capital letters, declared bankruptcy. Given the airline’s debt levels, it was not exactly a surprise, and it became the second Etihad-backed airline to file this year. Maybe Etihad should look into another business.

Airlines file for bankruptcy so many times* that they should be running for president but, in truth, it’s not a joke. Bankruptcy leads to job losses, particularly at the smaller carriers who don’t have a niche. AB has tried to be all things to all people at different times, first competing as a standard carrier, then as a low cost carrier and then as a low cost carrier that flew across the Atlantic. None of their efforts succeeded.

What Now?

airberlin

airberlin; Photo Credit: Creative Commons

Fortunately for passengers, there is minimal risk in booking a flight on a bankrupt carrier. As I mentioned above, airlines are, sadly, used to operating in bankruptcy. They need to fly to generate cash to pay their bond holders. The last thing that their creditors want is for the airline to shut down altogether, since they’ll likely end up with the planes. And you don’t have to worry that they’ll cut corners on safety to save euros. Mechanical issues will be the first use of cash.

Likewise, you are almost certainly protected by your credit card company. If the airline shuts down, you will almost certainly get a refund. And if flights are cancelled, Germany’s major carrier (Lufthansa) will likely pick up the pieces. The last thing that Lufthansa wants is a viable low cost carrier (easyJet, Ryan Air, etc.) getting a toehold in their home market.

The Bottom Line: Don’t worry about booking a ticket on airberlin, but maybe be a little extra nice to the employees. It’s toughest for them.

 


*Beginner’s Hint: Typically, airlines file Chapter 11 bankruptcy, which allows them to continue operating while they get their finances together. Airlines that have filed multiple times are said to have filed Chapter 22 or Chapter 33.

 

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