IAG buys Niki: what to watch for

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Are IAG and Vueling the deal’s only winners?

International Airlines Group, parent company of British Airways and Iberia, will buy Air Berlin’s Austrian leisure airline Niki for €20 million, it was announced in late December. But there may be unintended consequences with such a move.

The deal to acquire the insolvent airline will see IAG adopt 740 Niki employees and 15 Airbus A320-family aircraft. IAG will also invest an additional liquidity injection of €16.5 million in Niki, which will placed under a new Austrian subsidiary of its Spanish budget airline Vueling.

The deal also brings valuable slots for IAG at Vienna, Düsseldorf, Munich, Palma and Zurich airports.

IAG chief executive Willie Walsh calls Niki “the most financially viable part of Air Berlin, adding that “its focus on leisure travel means it’s a great fit with Vueling” while enabling Vueling “to increase its presence in Austria, Germany and Switzerland”.

The agreement follows the collapse of Lufthansa’s efforts to buy half of Air Berlin’s assets including Niki for €210 million. This was derailed when it was found it would give the combined group an 82% market share in Germany and a monopoly on many routes in Austria, Germany and Switzerland.

Short-term winners
The IAG-Niki deal is being appraised positively by the markets, the Financial Times, points out, because of its low price, as well as the fact that Vueling is starting the year with the expansion it has long been promising.

But the low-cost carriers easyJet and Ryanair may be the unintended short-term winners of the deal, the FT continues. This is because Vueling first needs an Austrian Air Operator Certificate – and the fares on some European routes are much higher since Air Berlin vanished, leaving a glaring gap in the market.

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