TUI said to weigh resurrecting leisure carrier

TUI AG is considering resurrecting efforts to form a joint venture with Air Berlin Plc and Etihad Aviation Group by taking a bigger role in the endeavor than originally planned, according to people familiar with the situation.

TUI is studying whether to take a majority stake or even full ownership of the proposed leisure airline – which was intended to combine assets from Air Berlin’s Niki and TUI’s TUIfly – said the people, who asked not to be identified as the talks are private. However, TUI’s reluctance to add German capacity stands in the way of a deal, said one of the people.

The original project, which collapsed a month ago when Abu Dhabi-based Etihad pulled out, was aimed at letting German tour operator TUI revive its unprofitable TUIfly airline while allowing loss-burdened Air Berlin to offload its Niki leisure brand.

While TUI could buy Niki and is considering such a deal, that option isn’t likely because carving Niki out of Air Berlin would be costly and time-consuming, one of the people said. Plus, TUI wants to reduce its German airline capacity amid a glut of seats.

That said, it’s in TUI’s interest to ensure Air Berlin’s survival because if that carrier fails, TUIfly would have to take back the 14 aircraft and crews it is leasing to its partner, once again setting back its streamlining efforts.

Representatives for Air Berlin and Etihad declined to comment. MDT/Bloomberg