The European Commission has approved Germany’s plans to grant airberlin a temporary €150 million ($178 million) bridge loan.

“The measure will allow for the orderly wind-down of the insolvent airline airberlin, without unduly distorting competition in the single market,” the Commission said Sept. 4. “At the end of the process, airberlin is expected to cease operating and exit the market.”

The Commission was notified of the loan Aug. 15, after key airberlin shareholder Etihad Airways withdrew its financial backing.

The credit, provided by German public credit institution KfW, will be paid in installments. Airberlin has to demonstrate its liquidity needs on a weekly basis and will only receive further funds when the existing liquidity has been used.

The anti-trust regulator gave the green light so airberlin can continue operating while it concludes negotiations to sell its assets. After this, airberlin will either need to repay the loan, or be wound down.

“The Commission found that the measure will help to protect the interests of air passengers and to maintain air-passenger services. At the same time, the strict conditions attached to the loan, its short duration and the fact that airberlin is expected to cease operations at the end of the process will reduce to a minimum the distortion of competition potentially triggered by the state support. The Commission therefore concluded that the measure is compatible with EU state aid rules,” the Commission said.

It added that rescue and restructuring aid are among the most distortive types of state aid and can only be granted once all other market options have been exhausted.

Victoria Moores victoria.moores@penton.com