Niki sale to BA owner IAG threatened by German court

By Maria Sheahan

FRANKFURT (Reuters) - Airline Niki's insolvency should have been filed in Austria not Germany, a Berlin court ruled on Monday, in a move which could unravel last month's deal to sell the Air Berlin business to British Airways owner IAG.

Niki filed for insolvency in Berlin last month after Germany's Lufthansa scrapped plans to buy the Austrian airline, grounding its fleet and stranding thousands of passengers.

After hurried talks to find a new owner for Niki before it lost its valuable runway slots, IAG agreed to buy the business and make it part of low-cost unit Vueling.

But Fairplane, a group representing airline passengers, said last week it had filed legal cases to have the insolvency proceedings for Niki shifted to Austria.

Fairplane argues Niki, which is registered as a company in Austria, had been profitable but lost access to bridge financing when insolvency proceedings were opened in Germany in December.

It also says it sees a conflict of interest in the appointment of the same administrators for Niki and its parent and debtor Air Berlin. IAG and Niki declined to comment.

The regional court for Berlin said on Monday a number of factors indicated that Niki's focus was in Austria rather than in Germany, such as the fact that most of its workers had Austrian contracts, that its accounting was done in offices in Vienna and that it was operating under an Austrian license.

It said it would reverse a lower court's Dec. 13 decision to allow insolvency proceedings in Germany, but said the ruling would only take effect after a one-month period during which Niki can appeal the decision in German federal court.

Fairplane said it did not believe a reversal of Niki's insolvency filings in Germany would scupper the airline's sale.

"As soon as there is an insolvency process for Niki in Austria, the administrator there can approve the deal agreed with IAG/Vueling in Berlin and pursue its implementation, it said in a statement.

IAG said it was "committed to working with all relevant parties to proceed with the purchase".

A court in Austria's Korneuburg is reviewing an application for a new insolvency process for Niki there and said on Monday a decision would be made on Friday at the earliest.

(Reporting by Maria Sheahan; Additional reporting by Alistair Smout and Kirsti Knolle; Editing by Alexander Smith and David Evans)