Two Become One – But Will They Really?

Air Berlin and TUIfly are in advanced negotiations to join forces, becoming a leading European leisure carrier. Main orchestrator behind the scenes is AB’s major stakeholder (29.2%) Etihad Airways that is eager to find a solution for ending its costly Air Berlin adventure. However, TUIfly pilots and cabin crews are fiercely opposing the project.

AB is flying into the unknown  -  photo: NUE
AB is flying into the unknown - photo: NUE

According to financial reports, Etihad has pumped one billion euros into ailing Air Berlin since stepping in five years ago. A costly undertaking driven by hopes to utilize Air Berlin for feeding passengers and cargo into Etihad’s Abu Dhabi hub. This has worked out to a certain degree but never paid off financially. The holes in AB’s pockets are too deep due to high operational and administrative costs, causing continuous losses year after year which Etihad compensated permanently by transferring huge sums to prevent AB from becoming insolvent.   

New airline holding on the horizon
Now however, the time seems to have changed for state funded Etihad with the Abu Dhabi owner demanding justifications from the management for high investments in loss making group members, particularly EY’s main problem child Air Berlin. Since the Gulf carrier’s strategy of throwing good money after bad has failed, other solutions were needed to ease the squeeze.
In the case of AB these have been vaguely outlined over the last couple of weeks, indicating the building of a new European leisure carrier by unifying TUIfly’s and part of Air Berlin’s fleet, including their Austrian daughter Nikki. According to plans, the three shall be incorporated into a new holding group based in Vienna, Austria. If realized, the new airline will operate with 62 aircraft, with 41 provided by TUIfly, 13 by Air Berlin daughter Nikki and 8 by AB’s Swiss subsidiary Belair.

Stand-alone or part of a holding? TUIfly’s future is uncertain  -  company courtesy
Stand-alone or part of a holding? TUIfly’s future is uncertain - company courtesy

Looking for an investor
Sources say that both the TUI Group and Etihad will hold 24.9 percent in the new leisure airline whose name is still unknown. In addition, unknown or maybe even undecided is who will take the lion’s share of 50.2 percent by becoming majority owner. It can’t be Etihad by simply upping their shares because being a non-European company they are excluded by law from possessing more than 50 percent in an EU carrier. So currently many are wondering who the new majority stakeholder will be. 

Leisure Cargo might stay on board
As regards to the newcomer’s air freight business it can be assumed that Leisure Cargo will be in charge. This seems to be the most suitable solution since Leisure is marketing the lower deck capacity of both Air Berlin and TUIfly since some time. Therefore, it would make much sense if the GSA stays on board. However, other options cannot be excluded since the negotiations between Etihad, Air Berlin and TUIfly are still ongoing with zero indication up to this point concerning air freight. This gives rise to much speculation.

TUI staff oppose the project
Coming back to Air Berlin and their efforts to get back into the black, it seems that their current fleet will be nearly halved, leaving 75 aircraft for medium and long-haul flights out of their two hubs Berlin and Dusseldorf (CargoForwarder Global reported). Another 40 aircraft operated by them will be wet leased by Lufthansa and passed on to their low cost daughter Eurowings for a term of six years, starting at the end of March 2017, provided the announced deal will ultimately be sealed. All other aircraft flying for AB’s daughters Nikki and Belair will become part of the new leisure carrier that will be headquartered in Austria.

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Emotions fly high
Meanwhile, many of TUIfly’s cockpit and cabin crews have reported sick, presumably in protest against the plans to amalgamate the carrier, owned by the world’s leading travel group TUI, with Air Berlin’s subsidiaries Nikki and Belair and integrate all three in a new holding. The protesters fear the loss of independence and job cuts once the holding deal is sealed.
Due to many staff having reported in sick, the TUIfly management was forced to cancel all flights last Friday. Affected were 108 departures and arrivals including many Air Berlin flights on whose behalf TUIfly operates 14 aircraft. There are no indications that the operational disruptions caused by sick leave will end soon.
In view of the ongoing resistance of its flight personnel, TUIfly parent Hanover, Germany-headquartered TUI has postponed the pending decision on becoming part of a new holding based in Vienna, Austria. They also granted the staff that TUIfly’s head office will remain in Hanover for the term of at least 3 years and salaries of the flying personnel will not be cut. As to the basic intention of creating a new leisure airline under the auspices of a holding: this controversial issue shall be tabled again in mid-November once the TUIfly staff’s emotions have calmed down, hopes the TUI management.

Heiner Siegmund   

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