Air Berlin discusses new airline with Etihad, Tui

German carrier Air Berlin PLC continues its reduction programme as it announced on Wednesday that it had agreed to discuss a transfer of its tourism operations to a new airline to be established by its biggest shareholder, Etihad Airways PJSC, and German travel giant TUI AG.

Air Berlin said the combination could see the 35 aircraft it now operates combined with German TUIfly.

Air Berlin didn’t disclose the potential value of the deal. The transaction “will be subject to successful negotiations and to all necessary corporate and regulatory approvals,” it said.

Last week Air Berlin agreed to rent 40 planes to its arch rival Deutsche Lufthansa AG, Germany’s largest carrier, and plans to cut 1,200 jobs. At the time it said it would consider strategic options for its tourism arm.

Years of losses and failed restructuring efforts have left Air Berlin debt ridden. Net debt at the end of June was €927 million ($1.04 billion). Even as other European airlines turned a period of low fuel prices into healthy profits, Air Berlin continued to lose money.

Air Berlin had tried but failed to make a mix intra-European budget service, charter operations, and long-haul flying. It accumulated €1.2 billion in losses since 2012. In the second quarter–when airlines generally make profits–the airline’s loss widened to €89.1 million from €37.5 million the year earlier.

State owned Etihad Airways PJSC, which owns 29.21% of Air Berlin, has repeatedly pumped money into the German airline to keep it afloat. It bought the majority of Air Berlin’s loyalty program almost four years ago and, in 2014, injected another €300 million through a convertible bond.

Source: MarketWatch