Germany's No.2 airline after Lufthansa (LHAG.DE) said on Tuesday it expected cash proceeds of 184.4 million euros from the sale of the 'topbonus' programme - more than the whole company's market value.

The move comes a year after Abu Dhabi-based Etihad bought about 29 percent of Air Berlin and agreed to grant the carrier up to $255 million in loans.

Middle Eastern carriers are building alliances and investing in new routes and new aircraft to divert a thriving traffic flow between Europe and Asia to their hubs and lure passengers with lower prices as well as better food and inflight service.

Emirates, the biggest Gulf carrier in terms of fleet and number of routes, has formed an alliance with Australian carrier Qantas (QAN.AX), and Qatar Airways is joining the oneworld alliance, which includes British Airways (ICAG.L).

Under Tuesday's deal, Air Berlin will keep 30 percent of the 'topbonus' programme, which has 3.1 million members, and will have the right to repurchase 10 percent from Etihad next year.

The deal, which gives the programme an enterprise value of 200 million euros, is to be completed by the end of the month.

"Good news for Air Berlin shareholders because the amount ... is quite substantial and at the upper end of market expectations," DZ Bank analyst Robert Czerwensky said.

Shares in Air Berlin were up 5.8 percent at 1.60 euros by 1025 GMT. The stock has lost almost 40 percent of its value this year, giving Air Berlin a market value of 177 million euros.

The airline, which has not made an operating profit since 2007, is struggling to recover after racking up debt in a few years of rapid expansion and said on Tuesday it would announce details of its new savings programme early next year.

At the end of September, its net debt stood at 853 million euros, about four-and-a-half times shareholder equity, though the sale of the 'topbonus' programme will almost double equity.

Airlines use frequent flyer programmes both to retain customers by offering them rewards for repeat bookings and to generate revenue. For instance, hotels, restaurants and credit card companies may buy frequent flyer miles from airlines to offer to their customers as an incentive to spend money.

Air Berlin said the sale of the programme will have a positive effect on earnings after five years and increase the value of the stake it retains. (Additional reporting by Klaus Lauer; Editing by Paul Tait and Mark Potter)

• A Permanent Economic Emergency