September 28, 2016 / 12:21 PM / 3 years ago

Lufthansa plans Brussels, Air Berlin deals in Eurowings drive

BERLIN (Reuters) - Lufthansa’s (LHAG.DE) plans to expand its low-cost airline Eurowings by taking over the 55 percent of Brussels Airlines the German carrier does not own, plus leasing up to 40 planes from ailing rival Air Berlin AB1.DE, it said on Wednesday.

Planes of German air carrier Lufthansa AG are seen on the tarmac at Frankfurt airport in Frankfurt, Germany, June 7, 2016. REUTERS/Kai Pfaffenbach/File Photo

The negotiations with Air Berlin throw a financial lifeline to loss-making carrier, which said it also planned to cut jobs and spin off its short-haul leisure flights into a separate unit, thus halving its fleet in a bid to restore profitability.

Lufthansa wants to expand Eurowings, which has 90 planes currently, into the third largest low-cost carrier in Europe behind Ryanair (RYA.I) and easyJet (EZJ.L).

Taking Air Berlin planes and crew - known as a wet lease - will bring a further 35 Airbus aircraft to Eurowings, while five of the planes will be used for Austrian Airlines.

“The leases are to be agreed at competitive market rates. The final agreement is expected to be concluded in the fourth quarter of 2016,” Lufthansa said in a statement. It said the planes would fly from the summer schedule starting on March 26, 2017.

Lufthansa said this year it was discussing how to bring Brussels Airlines, which has 49 planes, into its Eurowings platform. Brussels Airlines is strong on routes to Africa, where the Lufthansa network has gaps, and the German carrier has said it will look at ways to keep some of the branding.

Eurowings CEO Karl Ulrich Garnadt will provide more information on the expansion plans at a press conference on Thursday.

Lufthansa bought 45 percent of Brussels Airlines owner SN Airholding in 2009 for 65 million euros (56.08 million pounds), with an option to acquire the rest from 2011.

Lufthansa’s supervisory board earlier on Wednesday approved the exercise of a call option for the Brussels deal.

Because Lufthansa has loaned 45 million euros to Brussels Airlines, the German carrier can buy the rest for as little as 2.6 million euros more, which has irked Belgian shareholders of the holding firm, Belgian daily Le Soir has reported.

A person familiar with the matter confirmed the figure of 2.6 million euros.

Brussels Airlines served a record 7.5 million passengers in 2015 and made a record net profit of 41.3 million euros. Passengers numbers decreased in March and April as a result of the Brussels airport attacks but have been recovering since.

The transaction, is expected to be concluded at the beginning of 2017 after it has held discussions with SN Airholding shareholders, Lufthansa said.

($1 = 0.8906 euros)

Reporting by Victoria Bryan; editing by David Clarke and Jane Merriman

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