Flying High

The deal, announced Monday, Sept. 15, gives Lufthansa the option to take over all of Brussels Airlines in 2011 for a price not exceeding 250 million euros.

In the first phase, Lufthansa will take a 45 percent stake in SN Airholding as part of a capital increase by the Belgian group. The price for taking the remaining 55 percent in 2011 will depend on Brussels Airlines' performance within the ceiling set by Monday's deal.

The deal needs regulatory approval as well as support from Lufthansa's supervisory board and the shareholders and board of Brussels Airlines.

Brussels Airlines was created in 2006 after a merger between the successor to the bankrupt state-owned carrier Sabena, SN Brussels Airlines and discount airlines Virgin Express.

It is one of the few European carriers that does not belong to a major airline alliance. Brussels Airline is owned by around 40 shareholders, including the Virgin Group and several Belgian enterprises.

Win-win situation

Brussels Airline owns over 49 airplanes and has around 3,000 employees. The carrier, which has a well-developed air network in Africa, allows Lufthansa to offer its passengers an additional 12 destinations.

The German carrier has said it envisions Brussels Airlines continuing to operate largely independently after the deal.

The two airlines, which enjoy an excellent reputation internationally, could complement each other's offers and allow both to expand their routes, Lufthansa CEO Wolfgang Mayrhuber said.

For Lufthansa, the takeover of Brussels Airlines marks a further step in the German carrier's expansion plans.

Rising fuel prices and a global financial slowdown has hit airlines hard, sparking a wave of mergers and shaking up the aviation market. Three years ago, Lufthansa bought the ailing Swiss carrier, Swiss for around 310 million euros. Today, Swiss is worth several billion euros.

Lufthansa allegedly eyeing SAS, Austrian

Lufthansa reportedly is also eyeing Scandinavian rival, SAS in a bid to catch up with its competitor, Air France-KLM which remains Europe's largest airline.

Lufthansa, which expects operating profits of 1.4 billion euros in the current year, will have no problems buying SAS, which last week was worth around 830 million euros on the stock exchange.

The timing for a takeover of SAS could not be better either -- last year, SAS shares plunged by over 60 percent before partially recovering in the last three months.

Lufthansa is also considered a potential buyer for Austrian Airlines. The Austrian carrier expects losses of around 70 million euros this year.