Monday, September 15, 2008

Lufthansa Takes A Strategic Equity Share In Brussels Airlines

Here is the official Press Release:

Acquisition of 45 per cent for 65 million euros / Acquisition of remaining 55 per cent intended

Brussels Airlines is embarking on a new future with Lufthansa: 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 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 per cent 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 per cent from 2011. It would then wholly-own the Belgian carrier.

The price for taking up the remaining 55 per cent 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 should 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. '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 other’s 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.'

Etienne Davignon welcomed the successful outcome of the negotiations with Lufthansa: 'A joint future with Lufthansa provides us with the best chance of operating successfully against the competition. Lufthansa’s multi-hub and multi-brand strategies constitute the best prerequisites for the stability and future growth of Brussels Airlines'.

With the integration of Brussels Airlines, Lufthansa will further strengthen its position as a leading international network carrier. Through improved access to an attractive and important European market with huge economic potential and a high volume of premium traffic, Lufthansa will also gain in competitiveness. Brussels Airlines and its strong Africa network will profit from additional customers for the connections which can be laid on from the Brussels hub.

In their joint future, Brussels Airlines and Lufthansa can profit from substantial synergies in respect of earnings and costs, which are likely to rise gradually to a mid-double-digit million euro figure annually within three years of regulatory approval.

Lufthansa und Brussels Airlines – the figures
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.

Transaction:
1. Acquisition of 45 per-cent in SN Airholding SA/NV after regulatory approval
2. Development of joint portfolio
3. Initiation of admission procedure to membership of Star Alliance
4. Adaptation and safeguarding of air traffic rights
5. Complete takeover of SN Airholding SA/NV and Brussels Airlines after securing traffic rights on the basis of a call option, which can be exercised from 2011

For photos please visit our website: http://media.lufthansa.com

Deutsche Lufthansa AG
Konzernkommunikation
Tel. : +49 69 696 2999
Fax : +49 69 696 4834
http://presse.lufthansa.com

Brussels Airlines
Corporate Communications
Tel. : +32 2 723 84 00
Fax : +32 2 723 84 09
http://www.brusselsairlines.com