Air Berlin drops plan to buy Thomas Cook's Condor

FRANKFURT/LONDON (Reuters) - German carrier Air Berlin AB1G.DE scrapped its takeover of Thomas Cook's (TCG.L) (AROG.DE) Condor charter airline, putting the brakes on its attempts to expand its network to rival Lufthansa (LHAG.DE).

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

The airline's dwindling share price received a boost following the news on Friday, rising as much as 12 percent to 4.14 euros in early trade. Air Berlin listed on the stock exchange at 12 euros a share two years ago. Thomas Cook shares were 2.1 percent higher by 8:42 a.m.

"We have long expected this, given the ever-declining share price of Air Berlin, the very generous terms and the deteriorating macroeconomic environment," Landsbanki analyst Mark Reed wrote in a note.

"We are sceptical that any near-term alternative solution can be found for Condor, other than retaining it in-house. We do not believe a deal on equally favourable terms is possible."

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.

Air Berlin and Thomas Cook on Friday left the door open for alternate cooperation between the companies. They declined to give details.

"Both companies have agreed to continue negotiations regarding the feasibility of alternative solutions. Both Air Berlin and Thomas Cook are interested in exploring other options," Air Berlin said in a statement.