So, TUI and Etihad have abandoned their plan of merging TUIfly with Niki – an Austrian unit of Air Berlin, in turn part-owned by Etihad – to form a European leisure carrier. And the party most affected is Air Berlin.

The end of negotiations came as no surprise: the project had been delayed, with no visible progress, for several months. But for Air Berlin, the plan was a cornerstone of the latest restructuring effort, aimed at halving its fleet to 75 aircraft and focusing its network on scheduled flights and long-haul services from Berlin and Dusseldorf.

Air Berlin last year revealed its intention to stop operating tourist routes, in a bid to simplify its model, In March, it adopted Niki codes for all services to southern Europe (except Italy), Turkey, and North Africa. Some 35 aircraft – including 14 TUI-operated Boeing 737s previously wet-leased to Air Berlin – were transferred to Niki in an effort to complete the leisure business's restructuring ahead of summer 2017.

In late 2016, Air Berlin prepared a sale of shares in Niki to Etihad as part of the proposed venture with TUI. A financial report in April 2017 indicated that the transaction was "anticipated to be completed during the second quarter of the current financial year". A joint statement issued by Air Berlin and Etihad today confirms that the share sale "will proceed at a time to be agreed and in a manner compliant with European Union regulations".

Etihad Aviation Group's interim chief executive Ray Gammell states: "We continue to support the efforts of the Air Berlin management team." He adds: "We aim to finalise the [Niki] transaction soon."

Separately, Etihad last year agreed with Lufthansa Group the wet-leasing of 38 Air Berlin Airbus A320-family jets to Eurowings and Austrian Airlines. Most of these aircraft were transferred, as planned, earlier this year. The rollover is to be completed during 2018's first quarter.

Air Berlin said the wet-lease deal and the transfer of leisure operations to Niki – along with that unit's projected merger with TUIfly – were the main pillars of establishing a "lean, right-sized business".

The financial report published in April stated: "Key to Air Berlin's future sustainability is the reduction in the complexity of the Air Berlin business model, which in turn maximises the efficiency of operations." This, it foresaw, would lead to a "significant reduction in costs – particularly staff, maintenance and leasing costs".

But now, Etihad says Air Berlin's leisure operations will "continue to operate as a separate business unit under the Niki brand".

TUI, meanwhile, suggests that Etihad withdrew from the merger plan. "Niki is no longer available for a joint venture," says TUI, which affirms its belief that "a strong European leisure airline continues to make great strategic sense".

Now at question is how Air Berlin can reduce costs by transferring aircraft and crew to the Austrian subsidiary. However, the scrapping of the TUIfly merger may be an indication that Etihad has alternative plans. The Gulf carrier says details of Niki's new structure will be revealed by Air Berlin "in due course".

Air Berlin chief executive Thomas Winkelmann admitted in April that the existing restructuring measures – including the now-abandoned leisure joint-venture – were "not enough" to put the airline on a secure footing, and that an additional partner beyond Etihad would be required to step up the turnaround efforts. He said the partnership search would take months rather than years.

Lufthansa has been mooted as potential partner, following the wet-lease deal and the group's efforts over recent years to build up Eurowings as a European budget carrier. Furthermore, Lufthansa and Etihad earlier this year signed a partnership that, initially, covers maintenance, catering, and a limited range of codeshares between the two mainlines. The two sides said they foresaw scope for further co-operation.

Carsten Spohr, Lufthansa Group's chief executive, has indicated potential interest in a takeover of Air Berlin. But he identified the Oneworld carrier's debt burden, its cost base, and potential anti-trust issues as obstacles. "If these three topics are resolvable, one can imagine further steps," Spohr said in March.

This story has been updated with the fresh statement from Air Berlin and Etihad on the sale of Niki shares to the Abu Dhabi group

Source: Cirium Dashboard