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Lufthansa takes Strategic Equity Share in Brussels Airlines

Travel News Asia Latest Travel News Podcasts Tuesday, 16 September 2008

Lufthansa Chairman Wolfgang Mayrhuber and SN Airholding Chairman Eitienne Davignon have signed an agreement, which initially envisages a strategic stake in SN Airholding SA/NV and, in a second step, the full integration of the Belgian carrier, Brussels Airlines, in the Lufthansa Group. The agreement still requires the approval of the regulatory authorities and the Lufthansa Supervisory Board as well as the Board of Directors and shareholders of SN Airholding SA/NV.

In a first step, Lufthansa is taking out a stake of 45% in SN Airholding SA/NV for 65 million euros via a capital increase. After securing the air traffic rights of Brussels Airlines, Lufthansa will then have an option of acquiring the remaining 55% from 2011. It would then wholly-own the Belgian carrier.

The price for taking up the remaining 55% depends on performance-related factors so that the cost for complete acquisition of Brussels Airlines could amount to a maximum of 250 million euros.

The jointly drafted integration model is shaped along the lines of the successful cooperation between Lufthansa and SWISS: It envisages that Brussels Airlines will operate as a largely independent company in the Lufthansa Group subject to its uniformly formulated targets, strategic guidelines and financial resources. It also stipulates that, after exercise of the option, Brussels Airlines would retain its headquarters and management in Brussels. It will continue operating and developing its strengths under its familiar brand with its own aircraft and crew, and expand its local advantages in the Belgian market. That includes a demand-driven route network including intercontinental connections.

The Lufthansa hubs in Frankfurt, Munich and Zurich will complement the overall services offered to customers in accordance with specific market potential, customers preferences and cost structures. The integration is designed to enable Brussels Airlines to operate in a demanding market environment, to develop further, attain its growth targets and raise its profitability, and thereby offer customers and staff better long-term perspectives.

Lufthansa Chairman Wolfgang Mayrhuber emphasised that the bundling of strengths was necessary and sensible in order to strengthen competitiveness and overall cost efficiency, saying, "With Brussels Airlines and Lufthansa, two airlines whose services ideally complement each other and which enjoy an excellent reputation well beyond their home markets, are joining forces. Together we can offer more destinations, optimised connections, mutual use of each others frequent flyer programmes and extended lounge access, which will enhance the attractiveness of the portfolios of both airlines. Belgium and Germany as well as the Star Alliance member-airlines will profit from the merger. The fusion will not least contribute to strengthening European aviation. That is important, since only a strong and economically successful European airline structure can provide the quality global connections required by European business and industry, and offer employees long-term prospects."

The airlines in the Lufthansa Group carried 63 million passengers to 208 destinations last year. A total of 5.8 million passengers flew with Brussels Airlines and its partners. Brussels Airlines operates in a network encompassing 62 destinations. The merger will add a further 12 destinations to the Lufthansa network, the number on offer to Brussels Airlines customers will rise by 133. Lufthansa employs around 105,000 employees and operates a fleet of 513 aircraft (consolidated fleet). Brussels Airlines operates a fleet of 49 aircraft with a workforce of about 3,000 staff.

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