Lufthansa takes over Swiss

Lufthansa expands its control of European airspace Keystone

Germany’s Lufthansa has formally announced the takeover of Switzerland’s troubled national airline, Swiss.

This content was published on March 22, 2005

The Swiss government - the biggest shareholder of Swiss - decided earlier on Tuesday to support the buyout.

In a statement, Lufthansa said both companies' boards and major shareholders had approved the deal.

Lufthansa's chairman and CEO, Wolfgang Mayrhuber, and Swiss CEO, Christoph Franz, will sign the deal in Zurich at 8pm local time.

"The supervisory board of Deutsche Lufthansa and the board of directors of Swiss International Airlines today approved the business model jointly developed by both companies for the takeover and integration of Swiss into the Lufthansa group," the German carrier said.

The plan is believed to include pledges by Lufthansa to run Swiss as an independent premium airline and maintain Switzerland’s main airport of Zurich as an intercontinental hub.

Calls have also been made for an easing of flight restrictions, imposed unilaterally by Germany in 2003, on Zurich airport in a long-standing dispute over noise pollution.

Staggered takeover

Shares in Swiss were suspended on Monday as negotiators put the finishing touches to Europe’s biggest airline-merger deal since Air France took over the Dutch carrier, KLM, last year.

It is believed that Lufthansa’s first move will be an offer to buy out Swiss’s free-float shares - representing about 14 per cent of the company - for a price based on recent trading, or about SFr66 million ($56 million).

It is then likely to set up a holding company with major shareholders to allow Lufthansa to gain up to 49 per cent control.

Pending negotiations over Swiss’s landing rights, Lufthansa reportedly aims to take control of the remaining 51 per cent over the next 12 to 18 months.

Major shareholders, including the Swiss government and the country’s two largest banks, UBS and Credit Suisse, are expected to receive SFr400–500 million, reports said.

Swiss has been battling to cut costs and stem losses since it was launched three years ago following the collapse of Swissair.

The airline announced on Monday that it had reached agreement on the terms of a new collective labour contract with some of the trade unions representing ground staff.

swissinfo with agencies

Key facts

Swiss was formed in 2002 by merging the remains of Swissair with the regional carrier, Crossair.
The Swiss government is the single biggest shareholder in the airline with a 20.4 per cent stake in Swiss.
The country's two largest banks, UBS and Credit Suisse, and the Zurich cantonal authorities each has a stake of around 10 per cent.

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