Air Berlin scraps takeover of Thomas Cook's Condor

By James Regan and Mark Potter

FRANKFURT/LONDON (Reuters) - German carrier Air Berlin (AB1.DE) scrapped its takeover of Thomas Cook's (TCG.L) (AROG.DE) charter airline Condor, putting the brake on attempts to expand its network to rival Lufthansa (LHAG.DE).

Thomas Cook, Europe's second-biggest holiday firm, said on Friday it would suspend its share buyback programme while it continued talks with Air Berlin and pursued other options.

Sources close to the matter told Reuters that Condor might try to join merger talks between rivals TUIfly and Lufthansa's Germanwings. Thomas Cook, TUI (TUIGn.DE) and Lufthansa declined to comment. Germanwings was not available for comment.

Air Berlin blamed soaring oil prices and worsening economic conditions since the deal was first announced in September for calling off the deal.

Air Berlin's declining share price had a brief boost after the news, up as much as 12 percent to 4.14 euros in early trade. By 3:20 p.m. British time, the stock had retreated to trade down 1.1 percent at 3.66 euros. Thomas Cook was down 2.9 percent at 178.2 pence.

"This was a very obvious decision to take. They have got a lot of problems at the moment and they didn't want to make them worse," Exane BNP Paribas analyst Geoff Van Klaveren said.

The planned takeover of Condor followed Air Berlin's purchase of domestic rival DBA in 2006 and charter airline LTU last year as the carrier went on a shopping spree to expand its flight network.

The Condor deal would have increased Air Berlin's fleet to 160 planes, with Thomas Cook, Europe's second-biggest travel firm, taking a near 30 percent stake in the German carrier.