Air Berlin to be delisted; Etihad to lift stake: report

FRANKFURT Sat Mar 22, 2014 2:20pm EDT

A worker puts finishing touches on the booth of German flight operator Air Berlin for the International Tourism fair (ITB) in Berlin March 4, 2014. REUTERS/Tobias Schwarz

A worker puts finishing touches on the booth of German flight operator Air Berlin for the International Tourism fair (ITB) in Berlin March 4, 2014.

Credit: Reuters/Tobias Schwarz

FRANKFURT (Reuters) - Ailing German airline Air Berlin (AB1.DE), almost 30 percent owned by Abu Dhabi-based Etihad Airways, will be delisted and Etihad will raise its stake to 49.9 percent, a German weekly reported, possibly as a prelude to combining it with Alitalia.

Citing company sources, WirtschaftsWoche magazine said a group of German shareholders, among them former and current company executives, would raise their stakes to hold more than 50 percent between them, preserving the carrier's German status.

Air Berlin, Germany's No.2 airline after Lufthansa (LHAG.DE), needs to remain German so as not to lose its traffic rights outside the European Union.

Smaller investors, who now hold 38.5 percent of the group's shares, would be bought out, WirtschaftsWoche said, adding Turkey's Sabanci family would also exit. The family's investment vehicle ESAS owns 12 percent, Air Berlin's website said.

Etihad has been building a network of airlines by buying up minority stakes as it seeks to channel more passengers from its partners' planes to its Abu Dhabi hub.

Officials at Etihad were not immediately available for comment on the WirtschaftsWoche report.

An Air Berlin spokesman repeated a statement the company made on Wednesday, saying it was in advanced talks over options that would have a substantial impact on the airline if implemented, declining to comment further.

It said at the time it was pushing back its annual results by a week to March 27.

ALITALIA TALKS

Etihad is also in the final phase of due diligence to take an equity stake in troubled Italian flagship carrier Alitalia, which is burdened with more than 800 million euros of debt and is facing increased competition.

Talks have intensified and sources close to the matter said Etihad might be interested in buying a stake of up to 40 percent in the Italian carrier.

Banking and industry sources said Etihad was looking into ways to combine Air Berlin and Alitalia to generate synergies and to preserve Air Berlin's international traffic rights.

These discussions are at an early stage and any deal would likely face challenges from Rome and Italy's organized labor, who have already fought several attempts to end the independence of the country's loss-making flagship carrier.

A tie-up, be it a commercial accord or a full merger, would also probably force Air Berlin to leave the Oneworld alliance of airlines and to join SkyTeam, of which Alitalia is a member.

With such a tie-up, Etihad would widen an air traffic empire that already stretches from the Seychelles to Ireland and Australia, gaining access to populous regions and lucrative routes. It has also entered into a strategic code-share deal with Air France-KLM (AIRF.PA).

WirtschaftsWoche said that Etihad boss James Hogan would seek the German government's backing for the Air Berlin deal, which would be worth more than 100 million euros ($138 million).

Air Berlin ran into financial problems after expanding too rapidly in the last decade. It faces stiff competition from the likes of easyJet (EZJ.L), which is expanding in Germany and trying to tempt business customers in Europe's largest economy.

In November, Air Berlin scrapped its aim of breaking even at the operating profit level in 2013 and warned it would only come close to analyst forecasts for a 40 million euro loss before interest and tax if it found additional sources of income. ($1 = 0.7189 Euros)

(Reporting by Praveen Menon in Dubai, Peter Maushagen and Ludwig Burger in Frankfurt, Agnieszka Flak in Milan.; Additional reporting by Stanley Carvalho and Arno Schuetze; Editing by Mark Potter and Gareth Jones)