Etihad and TUI joint venture airline fails to take off

Only weeks after TUI had said that negotiations with Etihad to create an airline specifically targeting the leisure-focused budget airline sector of the German, Austrian and Swiss markets, the Gulf carrier has walked away from the deal. The proposal involved Niki, a subsidiary of partly Etihad-owned Air Berlin, and TUI fly, a subsidiary of the German travel group TUI. On announcing that talks had ended, Etihad stated that Nikki was no longer available for the joint venture.
Sources close to the proposed joint venture have said that the deal collapsed because “the sums did not add up,” basically because the cost of running the joint venture would be a struggle to be competitive against other low-cost rivals.
In December last year, TUI said the new airline would have roughly 60 aircraft and a seat capacity of 15m. TUI would have held a 24.8% stake and Etihad 25%; the remaining 50.2% held by the private foundation NIKI Privatstiftung, which also owns the Austrian NIKI airline alongside Etihad.
TUI has made it clear it is still open to a deal with another carrier, indicating that it is looking for outside help to promote growth in its German airline business, but may struggle owing to anti-competition concerns.
Meanwhile, this latest move has seen further questions asked about loss-making Air Berlin, Germany’s second-largest airline, which is currently relying on cash injections from Etihad to stay alive. The German carrier booked losses amounting to €1.2bn (US$1.3bn) for the last two years and made it clear this Wednesday that it was willing to work with Germany’s biggest airline, Lufthansa.