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Lufthansa cash call fuels Swiss takeover talk

Could Lufthansa be preparing to make a move on Swiss? Keystone Archive

Lufthansa’s surprise capital increase has the aviation world speculating that it may be preparing to make a bid for Switzerland’s national airline, Swiss.

This content was published on May 24, 2004 - 16:55

Analysts say Lufthansa’s explanation that it needs money to buy new planes is not convincing, and that it is more likely to be building a war chest for acquisitions.

Lufthansa announced on Monday that it intended to raise €750 million (SFr1.2 billion) through the issue of new shares to help pay for 15 Airbus A380 superjumbos, which are due for delivery in 2007.

But analysts say a call for fresh capital now does not make sense because Lufthansa is more flush with cash than its rivals, and it could easily sell off some of its stakes in other businesses.

Most think the German carrier is looking to expand by buying another airline, and that cash-strapped Swiss is the most likely target.

The recent merger of Dutch carrier KLM with Air France is thought to have prompted discussions about consolidation at Lufthansa. A necessary first step would likely be to persuade Swiss to throw in its lot with the Star Alliance, led by the German carrier.

Two weeks ago, Lufthansa's chief executive, Wolfgang Mayrhuber, told Swiss business newspaper “Cash” that he remained keen for Swiss to join the Star Alliance.

The carrier last September rejected Lufthansa's advances and decided to link up instead with British Airways’ Oneworld alliance.

“Swiss has closed the door,” Mayrhuber told Cash, “[but] we have not locked it.”

Trouble

The Swiss-BA relationship has had trouble getting off the ground, with the British carrier refusing to admit Swiss as a full member until it hands over client data.

Critics argue Swiss is effectively having to buy its way into the alliance by offering BA some of its lucrative landing slots at London’s Heathrow airport as security for a SFr50 million credit facility.

Munich-based aviation analyst, Dieter Schneiderbauer, recently told swissinfo that Lufthansa and its Star Alliance would be an alternative option for Swiss.

“If Swiss and BA do not succeed in implementing their intended cooperation, Swiss has to review all other options and [Lufthansa’s] Star Alliance would be one of them.”

The appointment of a new boss at Swiss last month - former Lufthansa manager Christoph Franz – has also prompted speculation that he might be more inclined to steer his airline towards the German carrier, rather than battling with BA.

But Schneiderbauer says that Franz would only make such a move if it was strategically sensible. "I would be surprised if Franz has any bias towards Lufthansa in that he is a manager who thinks strategically and who makes his decisions based on facts.”

Swiss is rumoured to be in talks about a capital increase of its own. The Sunday press said the airline was seeking to sell a stake of up to 15 per cent to the American venture capital firm, Texas Pacific.

Neither would comment, but one Swiss shareholder – the Swiss government - is thought to be interested in selling its 20 per cent stake.

swissinfo with agencies

Key facts

Lufthansa is to raise €750 million (SFr1.2 billion) by issuing new shares.
The carrier says the money will help pay for 15 Airbus superjumbos, due for delivery in 2007.
Swiss chose to link up with British Airways’ Oneworld alliance last September, rejecting Lufthansa’s advances.

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In brief

Analysts say Lufthansa’s cash call does not make sense for the reason given – to buy new planes.

Lufthansa has made no secret of the fact that it still wants Swiss join its Star Alliance.

Swiss entry into Oneworld is on hold amid discussions over client data and landing slots.

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