Condor joins merger talks with TUIfly and Germanwings

By Matthew Scuffham

LONDON (Reuters) - Thomas Cook's (TCG.L) charter airline Condor has joined talks with TUI Travel's (TT.L) TUIfly and Lufthansa's (LHAG.DE) Germanwings over a three-way merger that would create a national rival to Air Berlin (AB1.DE).

The companies said discussions were at an early stage, no commercial terms had been agreed, and there was no certainty of a deal taking place.

A combination of the three airlines would create a carrier with 142 aircraft carrying 30 million passengers annually, putting it ahead of Air Berlin, which carries 28 million passengers each year in its 133 aircraft.

TUI Travel has been in talks with Lufthansa since the start of the year over a merger between its charter airline TUIfly and Germanwings, which it hoped would lead to cost savings in relation to ground facilities, maintenance, and catering.

Thomas Cook joined the talks after German carrier Air Berlin (AB1.DE) scrapped plans to buy Condor blaming soaring oil prices and worsening economic conditions since the deal was first announced last year, sources familiar with the situation told Reuters in July.

Thomas Cook said at that time it was "pursuing a range of other available options" for Condor.

Blue Oar Securities analyst Derren Nathan said on Thursday the airlines' announcement will "come as no surprise to the market".

"Consolidation in the German leisure carry market is inevitable and TUI Travel has said that until the situation is resolved this will be a hurdle to improving operational performance," he said.