Lufthansa picks up Brussels Airlines

Brussels: The German aviation group Lufthansa has picked up a 45 per cent stake in SN Airholding, the holding company of Belgian airline Brussels Airlines, as the initial stake preceding a full acquisition.

Lufthansa will later take over full control of Brussels Airlines. In joint statement, Lufthansa said that its initial 45 per cent stake in SN Airholding comes at €65 million ($92 million), as part of a capital increase by the Belgian group.

Lufthansa retains the option to buy the outstanding shares from 2011, for a price of not more than €250 million ($351.6 million). It competed with British Airways and Hainan Airlines for the takeover.

Brussels Airlines is a fairly young airline, having commenced operations only a year ago, after being born out of an alliance between the budget airline Virgin Express and SN Brussels Airlines, the successor to the former Belgian flag-carrier Sabena. Sabena went bankrupt in 2001. It is part of a select few European airlines that does not belong to a major alliance, and is owned by around 40 shareholders made up of a number of Belgian enterprises and Britan's Sir Richard Branson's Virgin Group.

Brussels has been seeking strategic investors since the past few months. Sir Richard Branson's Virgin Group still holds a 30 per cent stake in the carrier, and has agreed to finally exit its former low-fare airline in Belgium. The deal is subject to regulatory approvals, support from Lufthansa's supervisory board, and the board and shareholders of Brussels Airlines.

Given the difficult times the industry is going through, Lufthansa has been vocal about its intentions to use the industry downturn to consolidate its position, and has been linked to bids for other European airlines such as Austrian Airlines, Scandinavian carrier SAS, and BMI of Britain.

Lufthansa has a fleet of 513 aircraft, which it used to ferry 63 million passengers last year, employing its staff of 105,000. Brussels Airlines flew 5.8 million passengers in its 49 planes, with its staff strength of 3,000 people.

Brussels Airlines will retain its brand after the merger, along with its management team and its Brussel's based head office which will be operated in a similar way as that of Swiss in Zurich.

Lufthansa Chairman and CEO Wolfgang Mayrhuber, speaking at a Brussels press conference said ''"We believe that a modular system of highly independent airlines is the most promising concept.''