Condor joins TUIfly/Germanwings tie-up talks

By Angelika Gruber

FRANKFURT (Reuters) - German charter airline Condor has joined months-old merger talks between fellow charter airline TUIfly and budget Lufthansa (LHAG.DE) unit Germanwings after the failure of a deal with Air Berlin(AB1.DE), sources familiar with the situation told Reuters on Saturday.

"(A merger) is the solution all three are striving for," one source said.

Germanwings, a primarily domestic carrier owned by Germany's biggest airline Lufthansa, could act as a feeder airline for the two charter airlines, the source said.

Reuters reported on Friday that sources close to the matter said Condor was trying to join the talks between Germanwings and TUIfly after Air Berlin dropped plans to acquire Condor, in part due to rising kerosene prices.

Lufthansa owns around a quarter of Condor, with the rest owned by British-German travel operator Thomas Cook (TCG.L). TUIfly belongs to tourism and shipping business TUI (TUIGn.DE).

Initial talks had covered working conditions for TUIfly pilots and the valuation of the individual airlines, but no conclusion had been reached on these issues, people familiar with the talks said.

Anti-trust issues at either a German or European issue might be a problem, the sources added.

In a preview of its Sunday edition, the Frankfurter Allgemeine Sonntagszeitung reported that industry sources said the airlines were at an advanced stage of negotiations, and would conclude an alliance by the end of September.