Lufthansa German Airlines is in discussions to buy Swiss International Air Lines, the two companies confirmed yesterday. If cemented, the long-expected deal would advance European airline industry consolidation, following the formation of Air France-KLM Group one year ago
(BTNonline, May 4, 2004).
Based on a "jointly developed business plan," the agreement would maintain the Swiss brand and traffic infrastructure "to the extent possible." It also likely could lead to integrated corporate and agency programs, such as those offered by Air France-KLM
(BTN, June 7, 2004). The transaction still requires various approvals and, according to European press reports, was the topic of a meeting today with Swiss's major shareholders.
Swiss has been unable to achieve profitability after being constructed from the remnants of Swissair three years ago. Industry observers have suggested a link with Lufthansa could offer the best scenario, allowing Swiss to concentrate on regional operations while Lufthansa handles most intercontinental flying. Both airlines have maintained their focus on premium customers, including similar all-business class services on transatlantic routes handled by PrivatAir
(BTN, July 19, 2004).
Should Swiss become part of the Lufthansa Group, which it previously considered two years ago, it would call into question the antitrust-immunized alliance already in place with American Airlines. Swiss already had backed away from the larger Oneworld alliance--anchored in North America by AA--when it ended a partnership with British Airways last year
(BTNonline, June 3, 2004) and opened the door for a potential seat at the Star Alliance table.
For its part, British Airways previously also had failed to secure a potential merger with KLM Royal Dutch Airlines
(BTN, Oct. 2, 2000). With both one-time acquisition targets choosing to align with its largest European competitors, British Airways would have to seek more modest partnerships in order to participate in industry consolidation. BA currently owns 9 percent of Spain's Iberia Airlines.