Budget carrier Air Berlin has filed for insolvency after main shareholder Etihad refused to provide further financial support, with the airline saying today that talks were ongoing with Lufthansa to buy parts of its business.
However, Irish budget rival Ryanair has filed a complaint with EU competition authorities in an attempt to block a Lufthansa takeover.
Ryanair announced this evening that it has lodged complaints with German officials and the European Commission, calling it an "obvious conspiracy" between the German airlines and their government.
Ryanair accused the German government of "ignoring both EU competition and State Aid rules". In a statement it said Berlin's competition authority is "likely to struggle to get out of bed" because of the government's involvement in the deal.
In a statement, Air Berlin said the German government will provide a bridging loan to allow all flights to operate, so scheduled flights will continue as planned and can still be booked.
Thomas Winkelmann, Air Berlin's chief executive, said: “We are working tirelessly to achieve the best possible outcome for the company, our customers and employees, given the situation.”
A spokesperson for Etihad, which last month announced a loss of nearly $1.9bn (£1.5bn) for last year, said:
In April this year, Etihad provided €250m of additional funding to Air Berlin as well as supporting the airline to explore strategic options for the business. However, airberlin’s business has deteriorated at an unprecedented pace, preventing it from overcoming its significant challenges and from implementing alternative strategic solutions.
The airline said that under those circumstances, it could not offer funding that would "further increase" its financial exposure.
Meanwhile, Germany's largest airline Lufthansa said in a statement it was "supporting the restructuring efforts of the airline jointly with the German government".
This also ensures that all aircraft that are currently operated by Air Berlin under a wet lease agreement for Eurowings and Austrian Airlines will continue operating as before.
Lufthansa is already in negotiations with Air Berlin to take over parts of the Air Berlin group and is exploring the possibility of hiring additional staff. Lufthansa intends to conclude these negotiations successfully in due time.
A deal for Lufthansa to lease Air Berlin planes had been given the go-ahead by the German cartel office back in January, allowing Lufthansa to more rapidly develop its budget Eurowings division.