IAG snaps up Air Berlin’s Niki  

IAG have purchased NIKI from the collapsed Air Berlin airline for a total investment of £32.5m. 

It’s reported that IAG will integrate the operation into Vueling and employ some 740 out of 1,000 NIKI staff.  

IAG’s chief executive Willie Walsh, said: “NIKI was the most financially viable part of Air Berlin and its focus on leisure travel means it’s a great fit with Vueling. This deal will enable Vueling to increase its presence in Austria, Germany and Switzerland and provide the region’s consumers with more choice of low-cost air travel.” 

European press have reported on Monday that Lufthansa’s failure to buy Air Berlin’s Austrian arm NIKI will likely cost the German government €150m (£133m), according to a senior member of Angela Merkel’s ruling alliance.  Collapsed carrier Air Berlin was extended a €150m loan by the German government as it grappled to stay afloat. Hans Michelbach, the deputy leader of the CSU – the Bavarian sister party of Merkel’s Christian Democrats called for a full investigation and claimed the European authorities had provoked Lufthansa’s withdrawal of its takeover offer for NIKI in order to ‘make possible the takeover by a certain investor at a bargain price.’ 

Why has IAG bought NIKI? 

The announcement of IAG’s purchase of NIKI pushed its share price up 2.7 per cent yesterday, this is because it represents a savvy consolidation deal in a market blighted by price wars and overcapacity. Lufthansa’s bid was blocked to allay EU competition concerns, as buying the airline threatened to create a monopoly on dozens of routes in Austria, Germany and Switzerland. This meant that IAG was able to swoop.

The market also likes the IAG-NIKI deal because of the apparently low price. Lufthansa had been seeking to buy Niki, including 800 staff and up to 15 aircraft, plus LGW, including 870 staff and 33 aircraft, for €210m. IAG is paying only €20m, plus a €16.5m liquidity injection, for NIKI and those aircraft. LGW and Niki are different businesses, with different airport slots.

Perhaps the most obvious reason for the market reaction is that IAG’s low-cost arm Vueling, which will operate NIKI flights through a new subsidiary, starts the year with the European expansion it promised at last year’s capital markets day.

It has been reported in the British media that the first day of trading of 2018 saw IAG outperform a weaker London market, with Merrill Lynch upgrading the stock to ‘buy’, largely on long-term trading hopes. Merrill put a target of 750p on the group, which closed at 668.8p.