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TUI, Germania agree on plan to launch budget airline - sources

BERLIN (AFX)- TUI AG and German domestic charter airline Germania have agreed on a plan to launch a budget airline together after weeks of negotiations, company sources said.

The important issues have been ironed out, the sources said.

The TUI supervisory board is meeting on Wednesday to discuss the plan, with an announcement expected to be made on Thursday, when it issues its first-half financial results.

In June, Der Spiegel magazine reported that TUI chairman Michael Frenzel had turned to his old business partner, Germania boss Hinrich Bischoff, for help in launching a budget airline.

The magazine said then that TUI and Germania will form a new company in which Bischoff will take 80% and TUI 20%, at least for the time being.

The new airline will initially take over five of Germania's Boeing jets and the existing routes from Berlin to Frankfurt and Cologne. In the next three years the fleet should grow to 50 aircraft and will offer long-distance flights, Der Spiegel said.

Tickets will be sold over the internet and through TUI travel agencies, the magazine said.

Other reports have said TUI is looking to use Cologne/Bonn airport as the hub for its new budget airline. One said the airline will service Madrid, Barcelona, Rome, Milan, Paris and a still unknown city in the UK.

Meanwhile, Deutsche Lufthansa AG this morning announced it will introduce a new pricing system from Sept 10, offering cheaper flights within Germany and, from October, to selected European destinations.

The changes are part of Lufthansa's strategy to deal with the increasing threat posed by budget airlines in the German market.