Air Berlin May Shed Tourism Business in New Etihad, TUI Deal

Air Berlin PLC is entering talks to transfer its tourism business to main shareholder Etihad Airways PJSC and German travel group TUI AG, the latest move by the debt-laden German carrier to shed assets and reduce staff to stem losses.

Air Berlin said deal could see 35 of its jetliner fleet combined with TUI's German unit TUIfly. Air Berlin already rents some of those planes, with crew, from 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.

Etihad and TUI in a joint statement said the new airline group would link destinations from Germany, Austria and Switzerland directly with popular tourist destinations.

The move follows Air Berlin's agreement last week to rent 40 planes to its rival Deutsche Lufthansa AG, Germany's largest carrier.

Air Berlin also announced plans to cut 1,200 jobs.

Years of losses and failed restructuring efforts have saddled Air Berlin with large debts—net debt at the end of June was €927 million ($1.04 billion)—despite the benefit of low fuel prices and growth in Europe's air-travel market which other airlines have taken advantage of.

Air Berlin tried but failed to make a mix intra-European budget service, charter operations, and long-haul flying.

The airline has accumulated €1.2 billion in losses since 2012. In the second quarter—when Europe's airlines generally make profits—the airline's loss widened to €89.1 million from €37.5 million the year earlier.

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

Write to Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

October 05, 2016 04:15 ET (08:15 GMT)

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