Lufthansa to sign deal to buy German rival Air Berlin on Thursday

Air Berlin has struggled to turn a profit over the last decade and filed for insolvency on 15 August

Shares in Lufthansa were up on 2.9 per cent on Thursday morning (Getty Images)

Lufthansa will sign a deal on Thursday to buy parts of its insolvent smaller German rival Air Berlin, Lufthansa’s chief executive Carsten Spohr said.

“We will see a milestone in the history of Lufthansa and Berlin today,” he said.

Air Berlin, which has struggled to turn a profit over the last decade, filed for insolvency on 15 August, and a government loan has kept its planes in the air while its administrator negotiates with prospective buyers for various parts of the business.

It said late last month that negotiations with Lufthansa and Britain’s easyJet would continue until 12 October.

A person familiar with the matter said on Wednesday that Lufthansa, Germany’s largest airline, was set to buy Air Berlin’s Austrian leisure travel airline Niki, its LG Walter regional airline and also acquire some additional short-haul aircraft.

The operations up for grabs also include access to take-off and landing slots at Air Berlin’s hubs in Tegel in the German capital and Düsseldorf.

EasyJet, which has a base at Berlin’s Schoenefeld airport, has been discussing acquiring 27 to 30 planes, though a media report earlier this week said talks could fail.

Spohr said on Thursday he expected Lufthansa’s imminent deal with Air Berlin would get European Union approval by the end of the year.

Shares in Lufthansa were up 2.9 per cent at €25.27, the top gained in Germany’s DAX market index by 8am GMT after Spohr’s comments and upbeat notes from brokerages.

Analysts at Bernstein Research raised their rating on Lufthansa’s shares to “outperform” from “market-perform”, saying they expected a deal with Air Berlin to add around €70 to €90m to annual operating profits at Lufthansa’s budget unit Eurowings in the medium term.

HSBC analysts lifted their target share price to €29 from €25, citing the imminent agreement with Air Berlin, a new multi-year labour deal with pilots announced this week and a positive trading performance this year.

Air Berlin, Germany’s second largest carrier, will cease operating flights this month, capping a turbulent summer for European carriers.

Italy’s national airline Alitalia is in administration and seeking investors too, British leisure airline Monarch collapsed at the start of this month.

Reuters