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A new wave of European airline consolidation is underway with several carriers across the continent in play. In the Nordic region, SAS said "it is in the process of evaluating various structural possibilities." In Central Europe, the Austrian government is planning to sell a stake in its flag carrier. Meanwhile, Brussels Airlines signed a deal that, if finalized, would see it absorbed by Lufthansa. All the while, British Airways and Spain's Iberia Airlines continue discussing a merger, first publicly proposed in July. But the most serious situation is in southern Europe, where Alitalia is teetering on the brink of collapse.
After years of financial distress, the Italian flag carrier this month finally succumbed to bankruptcy. In seeking to restructure, Alitalia may be broken up, with certain parts combined with rival Italian carrier Air One and relaunched by Italian investment group Compagnia Aerea Italiana. A merger with a larger European competitor--either Air France-KLM or Deutsche Lufthansa AG--also is a possibility.
Fellow SkyTeam alliance member Air France-KLM late last month said it intends "to remain Alitalia's strategic partner" and stated a willingness to take "a minority stake." Air France-KLM confirmed to Business Travel Europethat it may consider a bid for as much as 49 percent of Alitalia.
Air France-KLM in the spring was poised to buy Alitalia, beating out a proposal submitted by Air One parent AP Holding. But by April, Air France-KLM walked away, saying Alitalia's trade unions "formulated a new proposal corresponding to a totally different framework ... which would involve retaining a number of activities generating large-scale losses within the Alitalia group."
According to Reuters, Italian Prime Minister Silvio Berlusconi this past weekend told French President Nicolas Sarkozy that he wanted "commercial alliances" between Alitalia, Air France-KLM and Lufthansa, including code sharing and joint airport operations, but not necessarily a merger.
With an uncertain future, Alitalia appears barely able to maintain operations. On 13 September, the administrator overseeing the company's bankruptcy described "the worsening of the financial situation due to obstacles, problems and suppliers' requests, making it difficult to provide the ordinary services required for flight activities." According to European press reports, Alitalia soon may run out of fuel as suppliers refuse to provide any without prepayment.
This week, Alitalia's unions are in negotiations with CAI. ATWquoted Italian Industry Minister Claudio Scajola saying, "What's certain is that this is a failed company. Either a deal is reached [between unions and CAI], or all of the workers are laid off."
Lufthansa's Growing 'Sphere Of Influence'
Aside from a possible interest in aligning somehow with Alitalia, Lufthansa is making moves elsewhere. The German carrier this week signed a deal with Brussels Airlines parent SN Airholding that would provide an initial 45 percent stake in SN for €65 million (US$92 million) followed in 2011 by "the full integration of the Belgian carrier in the Lufthansa Group." All told, Lufthansa could pay "a maximum of €250 million (US$355 million)" for the complete acquisition. Meant to help Brussels Airlines "operate in a demanding market environment," the agreement must withstand regulatory scrutiny and gain approval from the Lufthansa supervisory board and SN's board of directors.
The Brussels Airlines network encompasses 62 destinations (including 50 in Europe and several in Africa) and 300 daily departures, served by 49 aircraft from its Brussels Airport hub. Lufthansa described Brussels as "an attractive and important European market with huge economic potential and a high volume of premium traffic."
Calling Brussels "a significant origin and destination airport, a gateway serving the seat of the ever-expanding European Commission, as well as being NATO's headquarters," the Center for Asia Pacific Aviation said the market "is a high-profile and high-yielding addition to Lufthansa's growing sphere of influence."
The two airlines said they are planning "optimized connections, mutual use of each other's frequent flyer programs and extended lounge access." Brussels Airlines would join Lufthansa in the Star Alliance.
Lufthansa plans to integrate Brussels Airlines in a similar manner as it did with Swiss International Air Lines earlier this decade. Brussels would operate "as a largely independent company," maintain its headquarters and management team and develop "its strengths under its familiar brand with its own aircraft and crew."
Lufthansa also is considering a bid for Scandinavian Airlines parent SAS Group, according to Reuters. While it confirmed that it is seeking a "structural solution," SAS provided no details. A member of the Star Alliance, SAS also encompasses Spanair and other smaller airlines. In 2007, SAS handled a total of 31.2 million passengers in a network spanning 152 destinations and 34 countries.
Lufthansa reportedly is interested in buying a stake in Austrian Airlines, yet another Star Alliance partner. Citing Austrian newspaper Die Presse, Reutersreported that Lufthansa, Air France-KLM and Russia's S7 are potential bidders for a stake in Austrian, which operates to 123 destinations in 64 countries.
In announcing the Brussels Airlines deal, Lufthansa chairman Wolfgang Mayrhuber said, "Only a strong and economically successful European airline structure can provide the quality global connections required by European business and industry."
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