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Etihad Airways scraps plans to launch budget carrier with TUI

Etihad-Air BerlinEtihad Airways has walked away from a long series of discussion with the TUI Group on launching a budget airline. Despite the fact the talks have been going on for months, Etihad’s negotiating team says it has pulled the plug on the dialogue in good faith.

An unnamed insider stated that Etihad had backed off because on paper the collaborative airline did not seem to be financially viable. The initial discussions had focused on inaugurating a budget carrier to serve holiday travellers in Switzerland, Germany and Austria.

The proposal was to build the airline by combining the operations of TUIfly Germany and Etihad affiliate Air Berlin. Only weeks ago, TUI confirmed talks were still ongoing. The proposal tabled late last year showed the joint carrier would launch with a fleet of 60 aircraft and a target of attracting 15 million passengers annually.

Details released since news of the original proposal surfaced including a breakdown of shares allocations. Etihad was supposed to get 25 per cent and Thomson Airways parent, TUI, 24.8 per cent while the controlling share would have been held by the NIKI Privatstiftung foundation.

The unnamed source said the negotiating teams had decided against going ahead with the project as they felt the foundling airline would have struggled to make a dent in the market shares of other European low-cost airlines. TUI has confirmed it is still looking for another partner to help grow its route options for the German market.

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