Air Berlin is to offload its share of Austria-based carrier Niki to shareholder Etihad Airways as part of a wide-ranging restructuring.
The move will see the creation of a new leisure airline in conjunction with Tui.
Selling its 49.8% indirect stake in Niki will bring loss-making Air Berlin €300 million.
Air Berlin said that Niki would take over short-haul leisure routes to destinations such as the Canary Islands, North Africa and Turkey from summer 2017.
Etihad will place Niki into a new leisure airline to be formed with Tui.
The new airline, approved by Tui’s supervisory board last month, will be 24.8% owned by Tui, 25% by Etihad and the remaining 50.2% will be controlled by the Austrian Niki Privatstiftung foundation.
Air Berlin chief executive Stefan Pichler said: “With this transaction we are simplifying our business model, reducing out dependence on seasonal destinations and improving our financial situation.”
Etihad acquired a 29% stake in Air Berlin in 2012, hoping to use it to boost its European network.
But Air Berlin has made a net loss in almost every year since 2008, posting a profit in 2012 only thanks to the sale of its frequent flyer program to Etihad for €185 million.
The German carrier plans to focus more on long-haul flying in a bid to stem losses. It is also leasing 40 aircraft and crew to Lufthansa subsidiary Eurowings.