Lufthansa has agreed to take over a large part of Air Berlin, which went bankrupt a couple months back after years of mounting losses and the withdrawal of support from Abu Dhabi-based Etihad, its key shareholder and creditor.
The deal was reported Thursday morning by the Rheinische Post and confirmed to Fortune by Lufthansa.
Lufthansa chief Carsten Spohr said Germany’s largest carrier will take over 81 of Air Berlin’s 140 leased aircraft and 3,000 of its roughly 8,000 employees, while investing €1.5 billion ($1.8 billion).
Although Air Berlin and Lufthansa’s existing low-cost airline, Eurowings, are the only carriers serving routes such as those between Munich and Cologne, Spohr said the combined operation would not boost prices as competition in Europe is set to “intensify.”
Read: Air Berlin Files for Bankruptcy as Etihad Airways Pulls Financing
Air Berlin has since late September been negotiating exclusively with Lufthansa and U.K.-based low-cost rival EasyJet. The big question now is what will come out of the EasyJet talks—an Air Berlin spokesperson declined to comment on Thursday morning, suggesting a statement would come out later in the day, while EasyJet also refused to comment on the “ongoing discussions.”
Air Berlin’s long-haul flights will cease at the end of this week, and tickets for all flights from the end of this month will be invalid. Subsidiaries Niki and LGW should continue as normal.
Read: Massive Pilot Sick-Out Makes Air Berlin Cancel 100 Flights
Air Berlin’s stated aim was to secure a future for 80% of its employees—indeed, earlier this week it said 500 of them had received job offers from other companies such as chemicals company BASF, railroad operator Deutsche Bahn and online fashion retailer Zalando, who participated in a special job fair coordinated by Air Berlin and a Berlin regional employment agency.
The deal will leave Lufthansa, a traditionally high-cost ‘flag carrier’, in a much better position to compete with the likes of EasyJet and Ireland’s Ryanair, which have taken large chunks of its share in short-haul routes within Europe. The deal comes only a day after Lufthansa pilots ended a dispute over pay and conditions stretching back over a year, which had involved repeated strike action and the loss of customer confidence. Lufthansa’s stock price has sky-rocketed in recent weeks, and hit a fresh 15-year high in Frankfurt early Thursday.
