TUI Travel PLC today announces that it has agreed the terms of a strategic cooperation between Air Berlin and TUI Travel’s German aviation business, TUIfly.
The transaction satisfies the key strategic goals of de-risking the TUIfly business through an exit of the scheduled flying operation and secures optimal capacity for our tour operator in Germany.
The key benefits of the Transaction to TUI Travel are:
* Eliminates dilution of tour operator margins caused by excess capacity;
* Eliminates losses in the scheduled flying operation of TUIfly, which generated an operating loss of c.€35m in the year ending 30 September 2008;
* Retains economies of scale benefits in TUIfly;
* Establishes a strategic relationship with Air Berlin, Germany’s second largest airline and the largest third party supplier of flying capacity to our German tour operator;
* Secures the future of the airline for customers and employees.
Under the terms of the Transaction, TUIfly will continue to operate 38 aircraft and will enter into long-term wet lease contracts(a) with Air Berlin and TUI Germany under the following commercial arrangements:
* 17 aircraft will be operated for Air Berlin. This represents the transfer of the ‘city-pairs’ flying operation to Air Berlin, along with full commercial responsibility and risk. The aircraft will be operated under the Air Berlin brand.
* 21 aircraft will be operated for TUI Germany, which will provide dedicated capacity for our charter business in Germany. This business will retain the TUIfly brand.
TUI Travel will acquire a 19.9% equity stake in Air Berlin for cash consideration of €64.8 million(b), via a capital increase in Air Berlin. Air Berlin will acquire a 19.9% equity stake in TUIfly for €36.3 million, also in cash.
Upon completion, TUI Travel will receive the right to nominate one non-executive director to the Board of Air Berlin.
The Transaction is subject to anti-trust clearances in Germany, Austria, Spain and Portugal and has an effective date of 1 October 2009 (depending on the satisfaction of certain customary conditions).
Peter Long, chief executive of TUI Travel PLC, said: “I am delighted to have agreed a commercial deal which not only optimises our tour operator programme in Germany but also minimises the disruption to our colleagues within TUIfly, who despite the recent uncertainty, have continued to deliver an excellent performance in the airline. Furthermore, I look forward to a successful strategic partnership with Air Berlin.”