Air Berlin Close To Taking Over TUIfly

Air Berlin could soon reach an agreement to take over parts or all of rival leisure carrier TUIfly.

Germany's second largest airline and travel group TUI are understood to have cleared most of the hurdles in their negotiations, but need to sort out some final details.

TUI has been trying to dispose of TUIfly for several years, as it tries to pull out its unprofitable airline business. Talks to combine TUIfly with Lufthansa's low-fare affiliate Germanwings and Thomas Cook's Condor failed late last year. After negotiations collapsed, TUI started an in-house restructuring program for TUIfly that aimed to keep the airline in the group, but in parallel started the Air Berlin talks.

According to industry sources, Air Berlin would be particularly interested in acquiring TUIfly's scheduled flying that it inherited from former low-fare carrier HLX, which became part of TUIfly following the merger with Hapagfly. TUI is understood to insist on keeping control of flights to leisure destinations. It needs significant airline capacity for its tour operating business. That demand led to the failure of the Germanwings/Condor/TUIfly merger last year, and it is unclear how ownership of TUIfly could be shared between the shareholders.

A key factor in the process is German pilot union Vereinigung Cockpit (VC). The union is currently dealing with an internal struggle for power between two different factions that are paralyzing any external negotiations. In the TUIfly case, VC has come up with conditions for approval that the airline says are impossible to accept, but VC appears to be able to change its stance until it is clear which faction prevails. Elections for a new leadership are scheduled at the end of April.

In an open letter, TUIfly's other employees accuse the pilots of only following their individual interests while not caring about the group as a whole.

If TUIfly and VC strike a deal, the Air Berlin takeover could still be called off. TUI is using the Air Berlin negotiations as a threat, as many observers are concerned that a new owner might make even deeper cuts to its fleet.

TUIfly currently operates 41 Boeing 737s and says this needs to come down to around 35 aircraft to make capacity meet demand more closely and return to profitability.

Photo credit: TUIfly