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Business

German Budget Airline Merger Looms

Cheap flight operators are now under pressure to consolidate in Germany as recession-wary consumers spend less and fuel prices soar.

Silhouette of an airplane landing before a crowd

There could soon be fewer airlines flying in Germany

News of talks on a merger involving charter and budget airlines controlled by Thomas Cook, Lufthansa and TUI refuelled speculation on Thursday of a major shake-out in the German travel sector, which is Europe's largest.

TUI, Lufthansa and the Thomas Cook Group said they were in talks on a potential merger of Condor, a subsidiary of Thomas Cook in which Lufthansa already owns 24.9 percent, Germanwings, of which Lufthansa owns 49 percent through Eurowings, and TUIfly Germany, a subsidiary of TUI.

The companies said no commercial terms had been agreed and that there was no certainty that any transaction would result from the talks.

On July 11, Air Berlin, Germany's second-largest airline after Lufthansa, withdrew from talks with Thomas Cook on taking over Condor.

The companies announced in September last year they were considering a two-phase takeover, valued at the time at around $700 million.

A Lufthansa Airbus A320-200

Lufthansa is looking for European acquisitions

Thomas Cook was to hold a little under 30 percent of Air Berlin in terms of the proposed deal. Significantly changed economic conditions, in particular a doubling in the price of jet fuel, led to the change of heart.

Budget airlines are under pressure in Germany this summer, as weakening consumer sentiment and high fuel prices cut into holiday travel.

Lufthansa looking to expand

Meanwhile Lufthansa has announced it is considering taking a major stake in Brussels Airlines by buying 45 percent of parent company SN Airholding for 65 million euros ($95.5 million).

Lufthansa said "constructive talks" were underway, adding that the aim was to take over the rest of the company after two years through a rights issue.

In a statement, Brussels Airlines confirmed the details of the planned deal, adding that "the intention of the negotiations is a collaboration with Brussels Airlines as (a) self-dependently operating airline within the Lufthansa affiliated group."

Lufthansa announced on Monday that it was considering taking over Austrian Airlines, which the Austrian government is privatizing. Austrian media report that Air China Ltd, Air France-KLM, Russian carrier S7 Airlines and Turkish Airlines Inc are all interested but that Lufthansa is thought most likely to win the bid.

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