In order to continue with its restructuring, airberlin has filed a provisional insolvency proceeding in self-administration at the local court of Berlin-Charlottenburg yesterday.
"As a minority shareholder, Etihad can not offer funding that would further increase our financial exposure".
"Etihad recently wrote off $808 million exposure to its partner airlines", CreditSights Inc. analyst Roger King said in a research note.
The German government is reported to have stepped in to fund the company to maintain scheduled flights.
Thomas Cook books some of its customers on flights with Air Berlin and its unit Niki, which means it is in the tour operator's interest that the German airline's operations continue.
Air Berlin has recorded loss of 782 million euros a year ago.
But Ryanair called this move an "obvious conspiracy" between the German government, Lufthansa and Air Berlin to "carve up Air Berlin's assets, while excluding major competitors and ignoring both European Union competition and state aid rules".
However, Etihad insists it remains "open to helping find a commercially viable solution for all parties" and that it "will support Air Berlin's management during these hard times".
Insolvent Air Berlin's chief executive said a national disaster had been avoided thanks to a government loan that keeps its planes in the air, after earlier blaming long delays in the opening of a new Berlin airport for some of its problems.
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Air Berlin had to choose the bankruptcy route as its businesses deteriorated in a fast pace.
Baron noted that Berlin received information on Etihad's decision to pull its funding from Air Berlin on Friday, causing a "big surprise" and prompting the government's immediate response.
Lufthansa confirmed it is now in negotiations with Air Berlin and is "exploring the possibility of hiring additional staff".
Air Berlin said it had sounded out the German states of North-Rhine Westphalia and Berlin in June to see whether they would provide loan guarantees after Etihad signalled it was rethinking its strategy of holding minority investments in smaller carriers.
When the travel firm announced it was stopping trading in July past year, it had 27,000 passengers in resorts across the globe and more than 110,000 customers with forward bookings for the peak summer months and beyond.
Neither the German government nor Lufthansa have commented on Ryanair's assertion.
Lufthansa has been operating 38 Air Berlin Airbus jets on its behalf under a "wet lease" arrangement.
Lufthansa and Easyjet are now reportedly looking to buy parts of Air Berlin.