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TUI board approves plans for new leisure airline with Etihad

Reuters - UK Focus

* German airline TUIfly to be spun off

* Etihad in talks to buy Niki from Air Berlin (LSE: 0GPE.L - news)

* TUIfly, Niki to form new venture based in Vienna

* Plans had provoked staff anger (Adds Etihad statement)

BERLIN, Nov 23 (Reuters) - Europe's largest tour operator TUI Group will spin off its German airline TUIfly into a separate company together with some operations from struggling Air Berlin after its supervisory board approved the move on Wednesday.

The new airline venture is part of a wide-ranging restructuring plan at Air Berlin, part-owned by Abu Dhabi-based Etihad and battling to stem losses.

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TUIfly will be combined with Air Berlin's Niki unit, which Etihad first plans to acquire, in a move that could bring financial relief for Germany's second largest carrier after Lufthansa (Xetra: LHAB.DE - news) .

Etihad said in a statement it was still working through that process and would provide a further update in due course.

The new airline will have a fleet of around 60 aircraft, serving tourist destinations from airports in Germany, Austria and Switzerland. Based in Vienna, it will be 24.8 percent owned by TUI (LSE: 0NLA.L - news) , 25 percent by Etihad and the remaining 50.2 percent will be controlled by an Austrian foundation.

TUI hopes spinning off its leisure airline into a new venture with Etihad will be a way to make better use of flights and crew during the quieter winter months, thus reducing costs.

TUI and Air Berlin's announcement last month that they were in talks prompted resistance from workers at TUIfly worried about job and pay cuts, with crew calling in sick and forcing the cancellation of dozens of flights.

Management defused the row by agreeing to keep pay and conditions in place for three years.

TUI said on Wednesday those commitments remained in place and were currently being negotiated in more detail.

Earlier on Wednesday, TUI rival Thomas Cook (Frankfurt: A0MR3W - news) said its own German airline, Condor, remained an integral part of its business for now, but that it could consider consolidation in the future. (Reporting by Victoria Bryan; Editing by Christoph Steitz and Ruth Pitchford)