Ryanair Is Buying A 75% Stake In Laudamotion (Formerly Niki)

The future of Niki has had more twists and turns than the most recent season of RuPaul’s Drag Race. My goodness. Niki was an Austrian low cost carrier, and then:

  • In December Niki ceased operations from one day to the next; they were owned by airberlin (which went out of business), though Lufthansa kept funding them, as they were planning on taking them over and expanding them as part of their Eurowings division
  • That plan collapsed when the European Commission said that they wouldn’t approve Lufthansa’s takeover of Niki over concerns of lack of competition, causing Lufthansa to stop funding Niki
  • Then IAG, the parent company of British Airways, Iberia, Aer Lingus, Vueling, and LEVEL, was planning on taking over Niki, and they had finalized a deal; this was undone when two courts ruled that the insolvency proceedings had to be moved from Germany to Austria, meaning the process would start over again
  • Then it was announced that Austrian Formula One champion Niki Lauda, who the airline is named after and who was also the founder of the airline, won a bid to take back the airline
  • A few days ago it was announced that Niki would be rebranding as Laudamotion, and would begin operations in the coming weeks with a fleet of 14 Airbus aircraft

Now there’s yet another plot twist. Ryanair has announced today that they’ve entered into a binding agreement with Niki Lauda to buy up to a 75% stake in the airline and to help grow it. Under this agreement, Ryanair will acquire an initial 24.9% stake in Laudamotion, and as soon as possible will increase this to 75%, subject to EU Competition approval.

While Niki Lauda will chair the board of the airline and oversee the implementation of his strategy, Ryanair will provide financial and management support, and will also offer six wet-lease aircraft for the summer 2018 schedule to enable them to have 20+ planes in their fleet.

Ryanair’s cost to acquire a 75% investment in Laudamotion is less than 50 million EUR, though they will also provide an additional 50 million EUR for start up and operating costs the first year. Both management teams think the airline will be profitable within three years, and they plan to grow the airline to a fleet of at least 30 Airbus aircraft, if successful.

Ryanair says that this partnership provides job security, career opportunities and growth in employment, and that it will allow consumers to benefit from more choices and lower airfares.

In my opinion this is a brilliant move on both the part of Ryanair and Laudamotion:

  • This gives Ryanair more access to Eastern Europe, and it’s a relatively low cost investment
  • This gives Laudamotion a huge marketing platform for their flights, and they can benefit from the scale of Ryanair’s operations; furthermore, Ryanair is willing to pay up to 50 million EUR of their start-up costs, meaning that Niki Lauda’s out of pocket here is much lower than it otherwise might be

Some might suggest that Niki Lauda got cold feet here. I don’t think that’s the case at all. I suspect he ended up buying the airline for significantly less than 50 million EUR, so he’s turning a quick profit, if nothing else. There aren’t many people who can sell the same airline twice at a profit!

I also think he knows that the airline has a lot more potential being part of Ryanair, now that it can’t be part of the airberlin platform, so long term he expects the airline can do well even if he only has a 25% stake in it.

One other interesting wrinkle is that long term I figured that Laudamotion’s Airbus fleet was incompatible with Ryanair’s Boeing fleet, though Ryanair’s CEO suggests otherwise:

The LaudaMotion AOC will support a fleet of Airbus aircraft which is something we have hoped to develop within the Ryanair Group for some years.

I’m not sure if he’s just saying this because he might as well take a positive attitude towards the fleet incompatability, or if he’s truly happy about that, because I would have never have thought that Ryanair would start to dabble with Airbus aircraft.

Comments

  1. Lucky,

    According to Austrian finance newspapers, Lauda paid between 22 and 26 million Euros for the re-acquisition of Fly Niki.

  2. There’s no way the German government & Lufthansa would have allowed Ryanair to acquire Air Berlin/ Niki in the first place.
    This is a very clever way for Ryanair to gain a foothold in Germany.

    Say what you may about Niki Lauda but he knows how to make cash!

  3. It’ll reach bankruptcy yet again!!!
    There is always a better alternative against Niki( okay it’s laudamotion now)…. that would be a bit expensive but it’s way better and is known as Eurowings!!!

  4. Whether it’s due to his past physical mishaps or his rather tumultuous aviation history, Lauda has turned into the World’s worst masochist. That O’Leary will make mincemeat out of him makes absolutely no doubt. On the infamous Michael’s side, he will recoup his investment in one single meeting with Boeing when discussing his next purchase. Remember when Easyjet had 737s? I am pretty sure that Boeing remembers.

    THEN, when O’Leary has had Laudamotion for virtually free, he’ll do with them anything he sees fit including (and probably) dumping them as a used kleenex.

    Although I am one of the only passengers who ever made money on the back of Ryanair (and it’s an exhilarating feeling…), I shall now fly Air Koryo, Afriquiyah or any Nigerian or Liberian airline before I fly Ryanair again.

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