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Is This for Real? Etihad and Lufthansa in Merger Talks

Is This for Real? Etihad and Lufthansa in Merger Talks

Is this for real? Lufthansa and Etihad in merger talks. Are Lufthansa and Etihad going to merge into one airline?

Is Etihad Airways of Abu Dhabi and Germany’s Lufthansa about to merge into one airline?

For years, the German airline Lufthansa has attempted to block the three big Middle Eastern airlines from increasing their market position in Germany.  However, a new report suggests that Lufthansa could not only be warming to a relationship with Gulf carrier, Etihad but also considering a major link-up that would involve the two airlines merging into one.

Lufthansa, the largest airline in Europe by revenue, had previously lobbied against the rise of the Gulf carriers.  Back in 2009, Lufthansa had asked German politicians to block the expansion of the likes of Etihad and Emirates into Germany and successfully blocked Emirates from Berlin.

The airline had even gone so far as to call on Canadian authorities to prevent the expansion of Emirates into Canada.

Etihad and Lufthansa About to Merge?

But could this all be about to change?  A report in Italian newspaper Il Messaggero has claimed that Lufthansa and Etihad Airways are in talks about the possibility of merging the two airlines.

The newspaper, citing unnamed sources, has reported that managers from both airlines have been investigating the possibility of Etihad taking a 30-40% stake in Lufthansa.  This would be achieved through a capital increase reserved for the Abu Dhabi-based airline.

In a second stage, the possibility of Etihad and Lufthansa merging into one airline has been mooted.  The sources quoted by Il Messaggero have suggested that managers from the two airlines will be meeting soon to speed up the talks.

Not Without Precedent

Back in June 2016, Brigitte Zypries, the German Economy Ministry state secretary said that Lufthansa should consider teaming up with one of the Gulf airlines.  Zypries was quoted as saying at the time: “Walling off the market won’t help, and the Gulf carriers have a geo-strategic advantage due to their location… One should think about other possibilities.”

Some European legacy airlines have already teamed up with other Gulf carriers for major investment with Qatar Airways buying a 20% in IAG, the owner of British Airways.

However, Lufthansa has repeatedly claimed in recent weeks that they have their hands full integrating 38 aircraft into its network from Air Berlin that it wet leased from Etihad.

In response to the reports, shares in Lufthansa had risen 6.84% on Tuesday at the time of publication.  The news comes after Lufthansa and Etihad recently announced their first codeshare arrangement.  Some commentators were surprised that the two airlines had reached such a deal after years of animosity between the two companies.

In an emailed statement a spokesman for Lufthansa said: “We do not comment on any market speculation as a general rule.”  Etihad Airways has been contacted for comment but have not responded at the time of publication.

Update: 18th January 2017

Two unnamed sources have been cited by Reuters as denying any possibility of Etihad taking a financial stake in Lufthansa.  Instead, the sources suggested that talks between the airlines were limited to codeshares and cooperation on catering matters.

Analysts at Barclays described rumours of a merger between the two airlines as “implausible”.  Commentators have also questioned how a merger would work under European and German takeover rules which would make such a move very difficult for Etihad.

Further Reading:

Everything You Ever Needed to Know about Etihad Airways Partners. And Why it Might Fail

Photo Credit: Lufthansa

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