Etihad buying majority of Air Berlin loyalty programme

The move comes a year after Abu Dhabi-based Etihad bought about 29% of Air Berlin and agreed to grant the carrier up to $255mn in loans.

Reuters/Frankfurt

Gulf carrier Etihad is buying a 70% stake in Air Berlin’s frequent-flyer programme, injecting cash into the loss-making German airline as it struggles to return to profit.

Germany’s No 2 airline after Lufthansa said yesterday it expected cash proceeds of €184.4mn ($242.7mn) from the sale of the ‘topbonus’ programme - more than the whole company’s market value.

The move comes a year after Abu Dhabi-based Etihad bought about 29% of Air Berlin and agreed to grant the carrier up to $255mn in loans.

Middle Eastern carriers are building alliances and investing in new routes and new aircraft to divert a thriving traffic flow between Europe and Asia to their hubs and lure passengers with lower prices as well as better food and inflight service.

Emirates, the biggest Gulf carrier in terms of fleet and number of routes, has formed an alliance with Australian carrier Qantas, and Qatar Airways is joining the Oneworld alliance, which includes British Airways.

Under yesterday’s deal, Air Berlin will keep 30% of the ‘topbonus’ programme, which has 3.1mn members, and will have the right to repurchase 10% from Etihad next year.

The deal, which gives the programme an enterprise value of €200mn, is to be completed by the end of the month.

“Good news for Air Berlin shareholders because the amount ... is quite substantial and at the upper end of market expectations,” DZ Bank analyst Robert Czerwensky said.

The airline, which has not made an operating profit since 2007, is struggling to recover after racking up debt in a few years of rapid expansion and said yesterday it would announce details of its new savings programme early next year.

At the end of September, its net debt stood at €853mn, about four-and-a-half times shareholder equity, though the sale of the ‘topbonus’ programme will almost double equity.

Airlines use frequent flyer programmes both to retain customers by offering them rewards for repeat bookings and to generate revenue. For instance, hotels, restaurants and credit card companies may buy frequent flyer miles from airlines to offer to their customers as an incentive to spend money.