FRANKFURT (Reuters) - A Berlin court on Thursday rebuffed a legal challenge to the insolvency filing of airline Niki, which could derail the sale of the Air Berlin AB1.DE unit to Britain's IAG ICAG.L, and referred the case to a higher court for a ruling.

FILE PHOTO: A couple stand near an empty Niki customer care desk at Palma de Mallorca airport, Spain, December 14, 2017. REUTERS/Clara Margais

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

Following hurried talks to find a new owner for Niki before it loses its valuable runway slots, British Airways owner IAG agreed last Friday to buy the business and make it part of its low-cost unit Vueling.

But Fairplane, a group representing airline passengers, said on Tuesday it had filed legal cases to have the insolvency proceedings for Niki shifted to Austria from Germany, which could unravel the sale.

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.

The Charlottenburg court said on Thursday it still believed that Niki was in its jurisdiction because its “center of main interest” was in Berlin, where parent Air Berlin was based, according to a statement by Berlin’s civil courts.

“The debtor (Niki) appeared to its business partners in a manner that showed it subordinated its corporate identity to Air Berlin PLC & Co. Luftverkehrs KG,” the statement said.

Also, passengers who booked tickets for Niki flights entered a contract with the parent, Air Berlin, it said.

The higher court, Berlin’s regional court, will rule on the matter shortly, the statement said, without being more specific.

IAG declined to comment on the matter.