After deals with Lufthansa Group and then IAG, where will NIKI eventually land?

19 January, 2018

It is now nearing three months since airberlin operated its last flight, but while most of its assets have now been absorbed by the Lufthansa Group and easyJet, its insolvency saga is being extended through leisure subsidiary NIKI.

The Austrian carrier’s assets were initially awarded to the Lufthansa Group by airberlin’s insolvency administration, following bankruptcy proceedings in Germany. However, the European Commission expressed competition concerns around the proposed transaction, leading the German airline group to submit revised commitments to only takeover LGW Luftfahrtgesellschaft Walter.

After this initial sale fell through, a second round of bids saw International Airlines Group (IAG) awarded NIKI’s assets for a sale price of EUR20 million, including interim liquidity financing of up to EUR16.5 million. IAG would have incorporated up to 15 of NIKI's A320s under a newly formed subsidiary of its Spanish LCC Vueling, based in Austria. At the time IAG CEO Willie Walsh described NIKI as “the most financially viable part of airberlin”.

CHART - Under airberlin Group's restructuring plan, NIKI had become the group's main leisure operator with airberlin transferring the bulk of its leisure routes to NIKI in summer 2017, leading to a near tripling of NIKI's year over year weekly seat capacity and a switch of focus from Austria to Germany and to a lesser extent to SwitzerlandSource: The Blue Swan Daily and OAG

The second round of proceedings also failed to deliver a completed deal after being met by a legal challenge from consumer advocacy group FairPlane, who argued NIKI’s insolvency proceedings should be moved from the German courts to Austria. The legal motion was on the basis of making it easier for passengers to file claims against NIKI, and to separate it from airberlin’s own process to avoid a conflict of interest.

The proposal by FairPlane was accepted despite NIKI's German creditors accounting for over 75% of the airline's debt, with Austria’s Regional Court of Korneuburg opening new main proceedings for the carrier and creating a cloud of uncertainty around IAG’s acquisition of the carrier.

NIKI's German based insolvency administrator Dr Lucas Flöther argues the Korneuburg Regional Court cannot legally overturn the decision of another EU state, but the uncertainty has already spawned renewed interest in NIKI’s assests from multiple bidders, including Ryanair and the airline’s original founder Niki Lauda.

The newly appointed Austrian based insolvency administrator for the carrier Dr Ulla Reisch has confirmed she will examine whether a more beneficial “alternative” to IAG exists, with new bids accepted until 19-Jan-2018.

Austrian media also reports NIKI CEO Oliver Lackmann plans to leave the company in Feb-2018, to take up a senior role at TUI Group, adding further ambiguity around the carrier’s direction and what it means for ownership and control. Mr Lackmann served at the carrier since Apr-2016, formally operating as accountable manager at airberlin.

On a bright note among the airberlin group assets, Swiss based subsidiary Belair Airlines has been acquired by SBC, a Dusseldorf based investment company specialising in restructuring. SBC aims for Belair's operations “to be resumed as soon as possible", while 200 suspended Belair employees are planned to be reinstated.

SBC is said to be undecided on whether the company will continue to operate the Belair brand, though is aiming for a summer 2018 relaunch. Operational management of Belair will be carried out in close cooperation with InAvia Aviation Consultants GmbH and its managing partner Michael Hoevel has been appointed the designate CEO of Belair upon its relaunch.

airberlin’s insolvency narrative is symbolic of a European airline industry yearning for consolidation. Although NIKI’s acquisition continues to be impeded, consolidation of NIKI and the wider airberlin group, along with the likes of Monarch Airlines and Alitalia, demonstrate the competitive climate widespread in European aviation.