chicagotribune.com
Lufthansa is mulling investing in a United-Continental merger
By Julie Johnsson
Tribune staff reporter
1:56 PM CST, February 19, 2008
Lufthansa is mulling investing in a merger between United Airlines and Continental Airlines, sources said, a deal that could bring a major new player -- Houston-based Continental -- into the global marketing alliance led by the German carrier and Chicago-based United.
Lufthansa has discussed taking an equity stake in the merged airline with United officials, sources said. They cautioned that the size of Lufthansa's investment and whether it would participate hadn't yet been determined. Both United and Lufthansa declined to comment on the talks.
"We are of course watching the developments in the market very closely, and have enjoyed a strong relationship with United Airlines as a key Star Alliance partner in the region," added Jennifer Urbaniak, Lufthansa's manager of corporate communications for North America. "In general, any decisions regarding future investments take into account the synergies that could be realized on behalf of our passengers.
The discussions illustrate how consolidation pursued by U.S. carriers is sending ripples across the Atlantic. Europe's largest carriers, enjoying stable finances and the strong Euro, see an opportunity to strengthen their global networks, analysts said.
Air France-KLM Group, a Lufthansa rival, has already indicated it would invest in a merger between Delta Air Lines Inc. and Northwest Airlines, a deal that is expected to be announced later this week.
All three carriers belong to the SkyTeam alliance, as does Continental. However, Continental last year broke ranks with the alliance, declining to join its SkyTeam partners in pursuing a closer collaboration that would require antitrust immunity.
For U.S. airlines mulling mergers, outside capital could provide a cushion to withstand an economic slowdown as well as funding for new aircraft or upgraded service.
Foreign carriers are allowed to hold up to a 25 percent ownership stake in U.S. carriers, although their non-voting stake could reach as high as 49 percent, said Brian Havel, associate dean and director of the International Aviation Law Institute at DePaul University's College of Law.
The weak dollar also makes such investments a relatively cheap way for European carriers to shore up their global partnerships. "Alliances are an inherently unstable, second-best substitute for a merger," Havel said.
Lufthansa and United have discussed cross-investments in the past, sources said. And Lufthansa already holds a nearly 30 percent stake in bmi, another key Star Alliance partner.
In December, Lufthansa announced it was acquiring 19 percent of JetBlue Airways for $300 million, its first direct investment in a U.S. airline.
Lufthansa is mulling investing in a United-Continental merger
By Julie Johnsson
Tribune staff reporter
1:56 PM CST, February 19, 2008
Lufthansa is mulling investing in a merger between United Airlines and Continental Airlines, sources said, a deal that could bring a major new player -- Houston-based Continental -- into the global marketing alliance led by the German carrier and Chicago-based United.
Lufthansa has discussed taking an equity stake in the merged airline with United officials, sources said. They cautioned that the size of Lufthansa's investment and whether it would participate hadn't yet been determined. Both United and Lufthansa declined to comment on the talks.
"We are of course watching the developments in the market very closely, and have enjoyed a strong relationship with United Airlines as a key Star Alliance partner in the region," added Jennifer Urbaniak, Lufthansa's manager of corporate communications for North America. "In general, any decisions regarding future investments take into account the synergies that could be realized on behalf of our passengers.
The discussions illustrate how consolidation pursued by U.S. carriers is sending ripples across the Atlantic. Europe's largest carriers, enjoying stable finances and the strong Euro, see an opportunity to strengthen their global networks, analysts said.
Air France-KLM Group, a Lufthansa rival, has already indicated it would invest in a merger between Delta Air Lines Inc. and Northwest Airlines, a deal that is expected to be announced later this week.
All three carriers belong to the SkyTeam alliance, as does Continental. However, Continental last year broke ranks with the alliance, declining to join its SkyTeam partners in pursuing a closer collaboration that would require antitrust immunity.
For U.S. airlines mulling mergers, outside capital could provide a cushion to withstand an economic slowdown as well as funding for new aircraft or upgraded service.
Foreign carriers are allowed to hold up to a 25 percent ownership stake in U.S. carriers, although their non-voting stake could reach as high as 49 percent, said Brian Havel, associate dean and director of the International Aviation Law Institute at DePaul University's College of Law.
The weak dollar also makes such investments a relatively cheap way for European carriers to shore up their global partnerships. "Alliances are an inherently unstable, second-best substitute for a merger," Havel said.
Lufthansa and United have discussed cross-investments in the past, sources said. And Lufthansa already holds a nearly 30 percent stake in bmi, another key Star Alliance partner.
In December, Lufthansa announced it was acquiring 19 percent of JetBlue Airways for $300 million, its first direct investment in a U.S. airline.
