Air Berlin, the discount airline that is Germany's second-biggest carrier and Europe's seventh-largest by passenger numbers, said Tuesday it is filing for insolvency.
Etihad Airways said on Tuesday that it can not bail out Air Berlin, which announced earlier that it had filed for administration.
Earlier on Tuesday, Air Berlin said it had filed for insolvency.
The airline said its flights were continuing and the German government confirmed it had loaned it €150 million. German Economic Minister Brigitte Zypries said Monday that loan should keep Air Berlin flying for at least three months.
The Federal German Government, Lufthansa and other partners are supporting airberlin in its restructuring efforts.
"We expect Air Berlin operations to continue during administration".
In the last two years it recorded losses of 1.2 billion euros and had to rely on cash injections from Etihad for survival.
The carrier was sustained by its main shareholder Etihad which owns 29.2 percent of the company's stock since 2011.
"Under these circumstances, as a minority shareholder, Etihad can not offer funding that would further increase our financial exposure".
"We're in a time when many tens of thousands of travelers and vacationers are in multiple global holiday spots", the Economy and Transport ministries said in a statement.
Union ver.di called it a "severe blow" for the more-than 7,000 employees of Air Berlin.
However, in a statement Ryanair noted: "Given the fact that the German Government is centrally involved in these manoeuvres, the Bundeskartellamt is likely to struggle to get out of bed". In December, it reached a deal to lease 38 plans to Lufthansa's units Eurowings and Austrian Airlines.
News agency Bloomberg estimates that Air Berlin has burnt through nearly €2 billion in six year. In addition to ongoing negotiation "to take over parts of the Air Berlin group", Lufthansa says it is "exploring the possibility of hiring additional [Air Berlin] staff".
"Germany is an important market for Etihad and Abu Dhabi, and we remain committed to providing comprehensive air links as a key enabler of trade and tourism".