In an effort to expand Lufthansa’s Eurowings brand, LH has been exploring options with fellow Star Alliance member ‘SAS’. Over the last 6 months, LH has been in discussions with SAS’ ownership (Norway/Denmark/Sweden Governments) to determine if some kind of merger or partnership would be possible to help both airlines accomplish their objectives. It has been no secret that the governments that have stakes in SAS want to get the airline off their books after providing an emergency lifeline to the airline in 2010 to keep it in business.
Lufthansa’s objective to is to take a quantum leap with Eurowings to put them at the top of the Low Cost Carrier (LCC) market in Europe, while SAS is looking to stem the tide of falling market share over the last several years.
From what I gather, the actual acquisition of SAS by Lufthansa is unlikely, as is a minority stake position. However, it seems that both carriers are keen on the idea of expanding their relationship that would allow Eurowings to immediately increase their footprint and give SAS the opportunity to expand their LCC market and move away from ‘Sovereign’ ownership. A partnership seems to offer the path of least resistance.
A major factor that will determine what happens between SAS and LH is what Lufthansa decides to do with Brussels Airlines. LH currently owns 45% of Belgian carrier with an option to buy the remaining stake. A Lufthansa Supervisory Board meeting on April 27 should bring clarity on this. Its widely believed that LH will acquire the remainder of the airline and actually integrate SN into its Eurowings division. LH has until 2017 to exercise the option to complete the purchase but it is likely to be completed this year if the board approves the transaction.
