As part of its planned expansion in Europe, Abu Dhabi’s Etihad Airways intends to increase its ownership stake in Air Berlin to 29 percent, a move that would make it the largest single shareholder in Germany’s second largest airline.

Under the “strategic cooperation,” announced December 19 in Berlin, Etihad will pay $95 million (€72.9 million) for new shares in Air Berlin, enlarging its present holding of 2.99 percent. Etihad will loan Air Berlin $255 million through 2016 “to support fleet development and network growth,” and sign code-share agreements with Austrian airline Niki Luftfahrt and Belair Airlines of Switzerland, members of the Air Berlin group.

Air Berlin has been struggling financially, losing money over the first nine months of 2011. In third-quarter results announced November 17, the carrier reported an 11-percent increase in revenue to $1.8 billion (€1.37 billion) compared to the prior-year period. Net profit was down from $177 million (€136 million) to $39 million (€30 million).

Competing with Dubai flag carrier Emirates and Qatar Airways, Etihad has been pursuing code-sharing arrangements with airlines beyond the Middle East and has expressed interest in acquiring a minority stake in Irish carrier Aer Lingus, the Financial Times reported. Air Berlin is the first outside airline in which it has acquired an equity investment. The state-owned carrier said it has “generally undertaken for a duration of two years” not to acquire more than 29-percent ownership and not to attempt a public takeover. The transaction is due to close in the first quarter of 2012.

As part of the deal, Air Berlin will shift its Middle East operation from Dubai to Abu Dhabi and operate four A330-200 flights weekly from Berlin to Abu Dhabi beginning January 15. Etihad will code share on 36 of Air Berlin’s 171 destinations; Air Berlin will code share on 24 of Etihad’s 82 destinations.

“This new partnership expands our network reach, gives us access to 33 million new passengers and provides us with a real opportunity for global growth. Through Air Berlin we gain immediate access to a broad and complementary European market, with outstanding connectivity options for customers of both airlines,” said Etihad CEO James Hogan. “We are always looking for ways to grow, and partnerships are a smart way to enhance our ability to compete on the world stage.”