Lufthansa to strengthen Eurowings through full acquisition of Brussels Airlines

Lufthansa is currently making strategic moves in an attempt to enable its low-cost carrier, Eurowings, to compete more successfully with such other low-cost carriers as Ryanair and easyJet. Having acquired a 45% stake in Brussels Airlines in 2008 for €65 million (US$73.5 million), it has been revealed that Lufthansa is looking to exercise the three-year extended option created in 2014 to acquire the remaining 55% stake in the Belgian airline, the final figure estimated to be €250 million (US$282.5 million) depending on performance, the airline having returned to profitability last year. The original purchase agreement of the minority stake included an option to purchase the remaining shares by 2014, which was subsequently extended by a further three years.
In addition to this move, two sources have confirmed that Lufthansa are also in negotiations with SAS, the Swedish, Norwegian and Danish half-owned airline, either to take a stake in the business, or to create an alternative form of partnership. According to one of the sources, “SAS could be docked onto budget platform Eurowings.”
Brussels Airlines was founded in 2006 and is the phoenix which rose from the ashes of Sabena, the Belgian flag carrier airline which was formed in 1923 but which was forced to file for bankruptcy in 2001. In 2006 the Brussels Airlines also merged with Virgin Express and today the remaining 55% of the business is owned by a consortium of approximately 40 Belgian investors.
Lufthansa’s annual shareholders meeting will be held on April 27, at which point the board are likely to present full details of the deal. Last month Lufthansa chief financial officer, Simone Menne, said that the German airline would like to “come to a conclusion” in relation to its full purchase of Brussels Airlines this year, adding “We expect an important step in the second quarter.”
With regard to SAS, people familiar with the industry said a full takeover of the Scandinavian airline by Lufthansa was unlikely, whereas taking a minority stake might come with a seat on the board and therefore a level of direct influence on SAS’ strategy. “Lufthansa wants to build Eurowings, but it does not want to take on any restructuring risk,” an unconfirmed source said.