Air Berlin (AB, Berlin Tegel) has announced it will sell its 49.8% shareholding in its Austrian production company, Niki (HG, Vienna), to Etihad Airways Group unit, Etihad Investment Holding Company LLC, for EUR300 million (USD318 million). The transaction is subject to government approval.

The move is part of a greater plan to create a new European leisure airline group in which Etihad will partner TUI AG.

As such, on the closing of the transaction, Etihad will immediately contribute its stake in Niki to the new European leisure airline group and will not effectively control, or become a majority owner of Niki.

As previously reported by the German press, the new airline, tentatively named Blue Sky, will be owned by TUI AG (24.8%), Etihad (25%), with the NIKI Privatstiftung foundation holding the remaining 50.2%. TUI will contribute its subsidiary TUI fly (Germany) (X3, Hanover) to the joint venture, including the five B737-700s and nine B737-800s it currently leases out to Air Berlin.

A filing with the Frankfurt Stock Exchange said as part of the transaction, Air Berlin will transfer its entire fleet of twenty-one A321-200s to Niki while in return Niki will transfer its entire fleet of five A319-100s and thirteen A320-200s to Air Berlin. The transaction also includes the discontinuation of Air Berlin’s wet-lease agreement with TUIfly.

Niki will also assume the operation of all Air Berlin's contracts to serve certain leisure destinations in Southern Europe (excluding Italy, but including the Canary Islands and Madeira), North Africa, and Turkey effective summer 2017. It will also assume Air Berlin's slots used for these destinations.

“We are delivering a decisive step towards our new strategy," Stefan Pichler, CEO of Air Berlin, said. "This transaction simplifies our business, reduces our exposure to seasonal destinations and improves our financial position. Step by step, we are transforming Air Berlin into a network carrier focused on domestic and European traffic to feed our two long-haul hubs in Berlin Tegel and Düsseldorf Int'l.”

The new leisure airline group, headquartered in Vienna, is scheduled to begin operations in April 2017, serving a broad network of destinations from Germany, Austria and Switzerland (Hanover, Berlin, Düsseldorf, Cologne/Bonn, Frankfurt Int'l, Stuttgart Manfred Rommel, Munich, Nuremberg, Karlsruhe/Baden-Baden, Hamburg Helmut Schmidt, Basel/Mulhouse/Freiburg, CH, and Vienna). Key markets will include the Balearics, Canaries, mainland Spain, and Greece.

The joint venture will be supported by the expertise of the Etihad Aviation Group and TUI Group. It will be able to leverage synergies and economies of scale accessible through Etihad Airways Partners and the TUI Group to ensure a lean overhead structure and competitive production cost.