Why Ryanair Is Buying A New Airline

Ryanair is planning to spend up to $123 million to gain a 75 percent share of Laudamotion, the startup airline launched by F1 champion Niki Lauda from the remains of Air Berlin subsidy Niki. While the Irish low-cost carrier says they look forward to the partnership, does Ryanair actually have an ulterior motive?

Although Formula One champion Niki Lauda has successfully launched airlines before, his third run in commercial aviation will be supported by Ireland’s biggest low-cost carrier. In a press release, Ryanair announced they would invest up to $123 million in Laudamotion, in exchange for a total of 75 percent of the new carrier.

Lauda decided to get back in the airline business after purchasing the remains of Niki, the Austrian arm of the failed Air Berlin. He originally merged Niki to Air Berlin in 2011, just to beat Lufthansa and International Airlines Group for the carrier’s assets. While Lufthansa purchased most of Air Berlin, Laudamotion will inherit Niki’s fleet of Airbus A321 aircraft and route rights.

But before Lauda flies once more, Ryanair will help the company get running. The Irish carrier will spend less than $61.7 million for their share of the airline, starting at 24.9 percent and rapidly moving towards 75 percent. Ryanair will also provide an additional $61.7 million for “year one startup and operating costs.”

“LaudaMotion will benefit from this partnership between Niki Lauda and Ryanair,” Michael O’Leary, chief executive of Ryanair said in a statement. “With access to the Ryanair fleet and financial resources, LaudaMotion will now grow more rapidly, as it seeks to compete in a market which is dominated by Lufthansa’s high airfares with its Swiss and Austrian subsidiaries.”

Does Ryanair have an underlying motive for supporting Laudamotion, instead of buying Niki outright and adding the routes to their map? An analyst contributing to Forbes suggests that Ryanair’s growing share of Laudamotion may have more to do with competing against Lufthansa than anything else.

“O’Leary would surely love for Germany to move in the direction of Italy, where Ryanair’s 28% share outstrips even that of Alitalia,” Martin Rivers writes for Forbes. “But he faces an uphill struggle given Lufthansa’s brand ubiquity and customer loyalty.”

Laudamotion will be based out of Austria, where they will begin operating charter flights to seven destinations. While the flights will be sold through Condor, it is unclear if Ryanair will either sell future flights or codeshare with the new carrier.