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Etihad in talks to buy stake in Air Berlin subsidiary

|By Arabian Post Staff| Etihad airline is in talks to take a stake in Germany’s Air Berlin subsidiary Niki, which is an Austrian-based leisure operator, media reports quoting insiders said. Niki is being spun off and merged with another player, it was stated.
Bloomberg said Etihad’s stake holding in Niki will be as a prelude to combining it with TUI AG’s German airline unit. The valuation will be closely watched, since an inflated price could suggest Etihad is seeking to fund Air Berlin while circumventing rules limiting foreign ownership of European Union airlines.
Bloomberg said that while talks on the Niki transaction are under way there’s no assurance that agreement will be reached. Air Berlin spokesman Tobias Spaeing declined to say whether the company will be reducing its holding in the Austrian business. Etihad and TUI also declined to comment.
Etihad has been trying to shore up Air Berlin since a 2011 deal aimed at feeding more passengers into its global network. The partnership has failed to turn around Germany’s second-largest airline, which has racked up 1.27 billion euros ($1.35 billion) in losses over three years, and the latest plan involves halving the fleet and creating a leisure airline with some of the surplus jets.
Under the revised strategy, Vienna-based Niki would contribute 19 aircraft to the new carrier, alongside about 30 from TUIfly and 14 that Air Berlin leases from the holiday specialist. Air Berlin separately plans to operate a further 40 planes on behalf of long-time rival Deutsche Lufthansa.
According to Bloomberg, Etihad’s room for maneuver in funding Air Berlin is limited, with the Mideast group already owning 29.9 percent of the German company, and by extension an equal stake in Niki. EU rules cap outside operators’ holdings in the bloc’s airlines at 49.9 percent. Exceeding a 30 percent stake would also trigger a mandatory takeover offer under German law.
In 2010, the Abu Dhabi carrier bought a stake in its ally’s frequent flyer program for 184.4 million euros, a price analysts said was inflated, and in 2014 it purchased a convertible bond issued by the German company. Then in April Air Berlin obtained 260 million euros in Etihad-guaranteed loans. The measures provided vital funds without lifting Etihad’s ownership.
The TUI board is scheduled to meet Wednesday, so that the plans involving Niki could be progressed as early as this week. (With Bloomberg)