United Arab Emirates (UAE) carrier Etihad Airways, the largest shareholder in airberlin, says it ended the talks after the parties had been "unable to reach agreement on the final nature of such a joint venture" after many months of negotiations. The leisure operations of airberlin will now continue to operate as a separate business unit, under the NIKI brand.
The goal of the talks between the two companies was to form a strong European leisure airline and TUI believes that is a path that TUIfly may choose to continue to follow. "A strong European leisure airline continues to make great strategic sense," says Sebastian Ebel, member of TUI AG's Executive Board in charge of Central Region (Germany, Austria, Switzerland, Poland).
The TUI Group says it "remains prepared to contribute to the stabilisation" of the German aviation market and "remains open for a partnership or the formation of joint ventures" serving a strategic goal of reshaping the market. "We will push the repositioning of TUIfly further ahead in order to develop long-term prospects for the airline and its employees," adds Mr Ebel.
TUIfly was formed in 2007 from the merger of Hapag-Lloyd Express and Hapagfly and flies to the classic holiday regions all around the Mediterranean, the Canary and Cape Verde Islands, Madeira and Egypt for TUI and other tour operators with a fleet of 40 'Next-Generation' Boeing 737s. Its main focus is on the Spanish and Greek markets with Palma de Mallorca and Heraklion its largest destination markets based on weekly city pair capacity from Germany.
CHART -TUIfly's Largest Destination Markets from Germany (weekly seats)
The partnership between TUIfly and NIKI represented a logical conclusion of airberlin's restructuring, the first phase of which has already seen 35 narrowbody aircraft transferred from airberlin to NIKI last year as most of its leisure flying was passed across to the Austrian carrier. Under the terms of the deal, Etihad was due to acquire airberlin's stake in NIKI for a reported €300 million to facilitate the merger with TUIfly and create the new business focused on point-to-point flying linking key tourist markets.
Aviation supports the German economy by underpinning 1.12 million jobs and €77 billion in GDP. But these benefits are under pressure because of onerous taxes, airport infrastructure challenges and the overall inefficiency of European air traffic management. In 2016, German airports handled a reported 232.2 million passengers in total, 3.4% more than in the previous year. This may appear a healthy growth, but in an environment where growth rates reached 6.2% in Great Britain, 8.6% in the Netherlands, 10.4% in Ireland, 11.0% in Spain and 11.8% in Luxembourg. It means the German industry is actually slipping in comparison to other European countries.
Germany's international market has grown 55.9% since the start of the century. This was dominated by a stronger first decade performance with an average 2.9% annual growth, but this decade is seeing the trend continue, albeit at a lower 2.6% annual growth rate. This decade's performance has been split between three years of little change in international capacity, followed by year-on-year growth of 2.6% in 2014, 7.8% in 2015 (the fastest rate of year-on-year growth for ten years) and 2.0% last year.
Last year's performance would certainly have been much stronger had the political situation in Turkey, a major outbound market from Germany, been more stable. Air capacity between the two countries fell 6.2% year-on-year in 2016 with O&D demand slipping 4.5%.
The recent growth in international capacity has been driven mainly by low-cost carrier growth with both easyJet and Ryanair expanding their activities in the German market and Eurowings becoming firmly established as the low-cost brand of the Lufthansa Group. In the past three years the low-cost carrier share of the German international market has grown from a stable 19% -20% share between 2007 and 2013 to 25.1% in 2015 and 27.4% in 2016.
READ MORE… NIKI no longer to merge with TUIfly in a setback for airberlin's restructuring