Etihad Airways welcomed airberlin’s decision to accelerate structural change within the airline to target sustainable profitability.

airberlin announced a strategic review of its long-term business model as it reported its 2013 annual financial results.

The predominant objective will be to restructure the airline and shape a robust business model that is fit for purpose in today’s competitive market conditions.

For this purpose airberlin will strengthen its management board with the appointment of a chief restructuring officer.

In support of this restructuring, Etihad Airways will subscribe to a €300 million eight per cent perpetual subordinated cumulative convertible guaranteed bond.

This will form part of a recapitalisation which is intended to strengthen and assist in the reorganisation of airberlin’s capital structure and secure the improved long-term prospects for the business and its stakeholders.

Etihad Airways’ stake in airberlin will remain unchanged at 29.21 per cent.

airberlin will issue a further bond of a minimum of €150 million for general corporate financing purposes.

James Hogan, president of Etihad Airways, reaffirmed that Etihad Airways was a strategic minority investor in airberlin, and remained confident and committed for the long term.

He said: “The airline is clearly in a very challenging position. 

“However, we are confident the business is moving in the right direction, and can be turned around but it needs an accelerated and fundamental restructuring.

“airberlin has our full support in this process.

“We’re here for the long term - for the airline, the travelling public and the community. 

“With the right strategic vision, and the right implementation, Etihad Airways believes airberlin can become a sustainably profitable business, securing the jobs of its 8,900 employees and the many thousands more workers it indirectly supports.”

Explaining the merits of Etihad Airways’ equity investment strategy in Germany, Hogan added: “This partnership has very clear benefits for Etihad Airways too.

“When we embarked on our partnership with airberlin in 2011 our access into the tightly restricted German market was limited. We operated just 25 flights per week to three destinations.

“In one single transaction at that time, for less than the cost of a single wide-body aircraft, Etihad Airways gained access to more than 30 million passengers and a combined European network of 228 destinations across 84 countries.”

Both airlines’ passenger numbers are expected to grow further as Etihad Airways’ equity alliance partners, such as Air Serbia and Etihad Regional, and airberlin’s broad range of commercial partners extend code-sharing to airberlin’s route network.

The benefits of this equity partnership extend beyond network access.

Leveraging economies of scale and collective purchasing power, the cost synergies came through joint procurement initiatives in aircraft, engines, maintenance, catering and technology.

The successful contribution came despite very challenging market conditions for airberlin, which reported operating losses for the year ended at December 31st 2013 of €231.9 million.

The German carrier was successful in reaching its €200 million cost reduction and revenue contribution target for the year, achieving key elements of its ‘Turbine’ turnaround program and reducing available seat kilometres, a key measure of capacity, by 5.1 per cent.

Business and cost synergies achieved with Etihad Airways played an important part in these savings.

However, airberlin reported an unusually sluggish outbound summer season due to the hot weather, followed by the traditionally difficult winter quarter.

This was compounded by increased competition and on-going weakness in the European economies.