TUI’s Air Berlin interest confined to safeguarding own staff

Bloomberg

TUI AG wants to safeguard the jobs of 700 of its employees staff who work planes leased to ailing Air Berlin Plc and isn’t interested in rescuing the insolvent carrier.
Europe’s biggest holiday company, which disclosed last week that it would engage in talks following the insolvency filing, doesn’t plan to pick up assets and is neutral on what Deutsche Lufthansa AG might acquire in a breakup of the business, Chief Executive Officer Fritz Joussen said in an interview.
“I have 700 people who are at risk,” the CEO said. “That is the reason why I’m there. I am not interested in Air Berlin and I’m not interested in Lufthansa. I am involved because 10 years ago we sold a portfolio of city routes to Air Berlin including the airplanes and including people.”
Air Berlin filed for insolvency August 15 after main shareholder Etihad Airways PJSC of Abu Dhabi withdrew financial support for the company, which has racked up more than $3.2 billion of losses in a little over six years and has net debt of 1.2 billion euros.
Joussen said “a cleaning up” of the German airline market is potentially positive given chronic overcapacity that’s led to rock-bottom fares. For example, Air Berlin priced a flight from Dusseldorf to Majorca at 19 euros, so low that “the taxi when you get there is more expensive than the flight,” he said, adding that he is unconcerned that Lufthansa might be left in a stronger position.
Shares of TUI rose as much as 0.8 percent and were trading 0.6 percent higher at 1,335 pence as of 9:48 am in London, where the Hanover-based company has its main listing. The stock has gained 15 percent this year, valuing the business at $10 billion. Air Berlin has declined 33 percent and is worth 47 million euros.
The best outcome for TUI would be to salvage jobs tied to its 10-year, 2009 deal in which it provides 14 Boeing Co. 737 aircraft and crews to Air Berlin on so called wet-lease terms, Joussen said.
“If somebody gives us business or wants to carve out business and hand back people in order not to lay them off, then we would be available,” Joussen said. “We are involved in negotiation, we have our interest, but our interests are targeted to find a home for 700 people.”
TUI owns only three of the planes involved in the lease deal, the executive said, with the other 11 owned by banks. “If they are handed back, it is 14 crews plus three aeroplanes,” he said.

Quick Solution
The wet-lease operations were folded into Air Berlin’s Austrian Niki operation in January to create a bigger tourist-focused airline. Following the failure of an Etihad plan for joint ownership, TUI pondered becoming a majority shareholder of the wider business, Joussen revealed. The company later decided that carving out the operation would be too complex. “I think now that time doesn’t allow for anything else but a more short-term decision,” he said.
The German government’s loan that will allow Air Berlin, which has 8,600 staff, to keep flying for the next three months is reasonable, Joussen said, as long as it’s intended to allow the insolvency to proceed in an orderly fashion.
“For the time being, it is the right thing. It’s important that we do things in a way that’s tolerable for people,” the executive said.