By signing a 210 million euro ($249 million)deal to buy large parts of insolvent Air Berlin, Lufthansa reinforced its position as Germany’s largest airline on Thursday.
To quickly expand its Eurowings budget business, Lufthansa plans to use the Air Berlin assets. Reaching their highest level in nearly 17 years, Lufthansa shares up more than 3 percent, pushed by the news of the deal.
For Air Berlin a government loan has kept its planes aloft while its administrator negotiated with prospective buyers for parts of the business and the company has struggled to turn a profit over the last decade and filed for insolvency on Aug. 15.
Air Berlin said in a statement that 20 additional aircraft, its LG Walter regional airline and Air Berlin’s Austrian leisure travel airline Niki, have also been agreed to be taken over by Lufthansa.
“This contract provides new opportunities for jobs for a large part of our workforce. But we can only really breathe again when the EU Commission approves the deal,” Air Berlin Chief Executive Thomas Winkelmann said.
He expected the European Union to approve the transaction by the end of 2017, Lufthansa CEO Carsten Spohr said earlier.
It would be referring the matter to the EU competition authority in due course, said Ryanair, which has previously called the talks a “stitch-up”.
The German authorities would follow the process closely as the German authorities would follow the process closely, said Andreas Mundt, head of the German cartel office.
Air Berlin said, without providing details that talks are continuing to sell some of Air Berlin’s remaining assets to Britain’s easyJet and other bidders.
Discussions on acquiring 27 to 30 planes are ongoing with EasyJet, which has a base at Berlin’s Schoenefeld airport. Some parts of the business could be picked up by others, such as Thomas Cook’s Condor, Air Berlin had previously said.
His airline would be investing around 1.5 billion euros in total as a result of the Air Berlin deal, Lufthansa CEO Spohr told a German paper earlier.
For the costs of taking on new staff and for the purchase price, the board freed up 1 billion euros of funds last month and the sum includes investment in new planes.
Capping a turbulent summer for European carriers, operations of Air Berlin, Germany’s second largest carrier, will cease this month.
While British leisure airline Monarch collapsed at the start of this month, Italy’s national airline Alitalia is in administration and seeking investors too.
While he would be interested in talks to create a new Alitalia, he was not interested in the Italian carrier in its current shape, Lufthansa’s Spohr said on Thursday.
Saying they expected a deal with Air Berlin to add around 70 to 90 million euros to annual operating profits at Eurowings in the medium term, analysts at Bernstein Research raised their rating on Lufthansa’s shares to “outperform” from “market-perform”.
Citing a positive trading performance this year and the imminent agreement with Air Berlin, a new multi-year labor deal with pilots announced this week, HSBC analysts lifted their target share price to 29 euros from 25 euros.
(Adapted from Reuters)