Etihad-Air Berlin deal scuppers IAG takeover

Etihad-Air Berlin deal scuppers IAG takeover

Etihad Airways has taken a 29% stake in Air Berlin to become the largest single shareholder in the German carrier, a code-share partner of British Airways.

The deal announced on Monday will see Etihad provide up to $255 million (£162 million) over five years to finance fleet development and network growth at Air Berlin. In return the Abu Dhabi-based carrier will take two seats on the board of Air Berlin.

Etihad’s stake-holding will not stop Air Berlin joining the Oneworld alliance with British Airways and American Airlines, but appears to end the likelihood of a takeover by BA parent company International Airlines Group (IAG).

The Middle East carrier remains outside the global airline alliances, as do its Gulf rivals Emirates and Qatar Airways.

Air Berlin and Etihad will implement a code-share agreement and seek anti-trust immunity to allow them to coordinate services, sales and marketing. The pair will also merge their frequent flyer programmes.

The German carrier will switch its Middle East operation from Dubai to Abu Dhabi and launch a Berlin-Abu Dhabi service operating four times a week from mid-January, feeding passengers into Etihad’s hub airport.

It is unclear what implications if any the deal will have for Air Berlin’s relationship with TuiFly – German sister carrier of Thomson Airways – for which Air Berlin operates scheduled services.

Germany’s second-biggest carrier behind Lufthansa, Air Berlin remains on course to join Oneworld early next year. A Oneworld spokesman told Travel Weekly: “A number of member airlines co-operate with partners that are not members of Oneworld and some of these hold minority stakes in member airlines.

“Air Berlin has a strong commitment to moving ahead with membership of Oneworld in the early part of next year.”

The German carrier had been seeking investment since the summer following a series of poor financial results and had been in talks with both Etihad and the HNA (Hainan Airlines) Group of China.

Air Berlin plans to cut its fleet from 178 aircraft to 154 for summer 2012 as part of plans to save euro200 million (£174 million) next year.

In August the airline announced it would withdraw from Manchester and pull off four of its eight routes from London as it focused on hubs outside the UK. More recently it announced it would cease flying from German airports Dortmund and Erfurt this winter to save money.

Air Berlin’s management has pinned some of the blame for its financial state on the German equivalent of Air Passenger Duty - introduced this year – claiming it has brought “a dramatic distortion of competition”.

Chief executive Hartmut Mehdorn welcomed the deal with Etihad, saying: “This partnership opens enormous opportunities. Abu Dhabi will become our new gateway to Asia and Australia.”

Etihad chief executive James Hogan described the deal as the most important in Etihad’s history. He said: “This partnership expands our network reach [and] gives us access to 33 million new passengers. We gain immediate access to a broad and complementary European market.”

The Abu Dhabi carrier previously held a 2.99% stake in Air Berlin. ESAS Holding, parent company of Turkish carrier Pegasus Airlines, remains the second largest shareholder in German carrier. However, the deal will dilute the value of Air Berlin’s existing shares by about 27%.

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