ATW Editor's Blog

O’Leary’s winning hand with Lauda

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Michael O’Leary must have played a lot of Risk as a boy. And he frequently won, judging by how he played his hand over LaudaMotion, a prize that was keenly sought by Lufthansa and British Airways owner IAG.

Today’s announcement that Ryanair has struck a deal with Niki Lauda to take up to a 75% stake in his newly-acquired LaudaMotion startup is a fascinating twist in a fast-changing story. It started years ago with Lauda himself, when the Formula 1 champion and pilot launched NIKI, an Austrian-based airline that was acquired by airberlin in 2011.

After airberlin filed for bankruptcy and ceased operations in late 2017, NIKI also stopped operating. A small airline, with 1,000 staff operating a leased fleet of around 20 Airbus A321s and seven wet-leased TUIfly Boeing 737s, NIKI’s strategic importance and potential was still clear and the industry giants were quick to advance. IAG and Lufthansa were among those that bid, for different reasons. NIKI’s Vienna-based network across Austrian, German and Swiss cities, linking them to other popular European leisure destinations, lay in the heart of Lufthansa Group territory. A turf Lufthansa wants to defend from new LCC competition, and one where IAG CEO Willie Walsh hoped to grow by making NIKI part of IAG’s Spanish LCC Vueling operations. IAG described NIKI’s network with airports such as Dusseldorf, Munich, Palma, Vienna and Zurich as “an attractive slot portfolio”.

Not surprisingly given that portfolio, Lufthansa’s bid to buy NIKI was thwarted by European competition authorities. Walsh, who said NIKI was “the most financially viable part of airberlin”, believed he had sealed the deal with a €20 million ($24 million) bid plus the provision of up to €16.5 million in liquidity. At the end of December, IAG’s was the only remaining bid.

But then the courts stepped in and ruled that NIKI’s bankruptcy process must be held in Austria, not Germany where the IAG deal was struck. This time it was IAG’s plan that was upended; by mid-January, Lauda himself was not just back in the game, but once more the owner of his namesake airline. His was the winning bid for NIKI, Austrian and German administrators declared Jan. 23, and Lauda announced he would rebrand and relaunch NIKI as LaudaMotion.

As we now know, however, the game was still not concluded. Always on the sidelines, quietly expressing interest but never really declaring his hand, was O’Leary, a man not known for keeping his thoughts to himself.

As it turns out, he and his exec team have been spending some time in Vienna and negotiations went well, ending with an agreement in which the Irish LCC giant will take a 24.9% stake in LaudaMotion, with a plan to grow ownership to 75% if competition authorities allow.

While Lufthansa might protest, it’s hard to see what the competition watchdogs won’t like about this deal. Where Ryanair goes, ultra-low fares follow. Ryanair’s size, muscle and strong financial position will ensure not just the survival of a small LCC startup on Lufthansa’s back door, but also its growth. Lauda and O’Leary will likely enjoy shaking up that market.

O’Leary kept his cards close through NIKI’s final chapter. During that time, Walsh and Lufthansa Group CEO Carsten Spohr revealed quite a bit about how they intended to use the NIKI assets. That will be important information to the Lauda-O’Leary team as they move forward with their new partnership. There may still be risk, but you can bet that with this leadership, every step will be meticulously calculated.

Karen Walker/ATW karen.walker@informa.com

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