Lufthansa’s Executive Board was set to give their recommendation today on whether or not the Supervisory Board should vote to acquire the remaining stake of Brussels Airlines that LH does not already own. Over the last few weeks, momentum had been growing that the deal would be announced in April, but not we’ll need to wait til September at the very soonest to see what is decided. Currently, LH owns a 45% stake in the airline and has until 2017 to exercise its option to buy the remaining 55% from SN Airholding.
The reason given for this delay is to allow Brussels, and Belgium at large to recover after the recent bombings at the airport and metro stations. On the surface, it looks like a valid reason but in my opinion I think there may be other reasons that go beyond sympathy.
Since announcing the potential buy up of SN, Lufthansa has made it no secret that it is looking for other partners as it tries to boost its Eurowings LCC (Low Cost Carrier) division. In addition to the SN deal, which still seems most likely, LH has approached SAS as well as Thomas Cook’s ‘Condor’ to see if there is any desire from these airlines to join Lufthansa Group. Lufthansa has simply said that exploratory conversations had taken place but no decisions had been made.
In my opinion, I don’t think LH tapped the brakes on the SN deal because of the terrorist attacks. As tragic as the events were, it was not a direct strike on Brussels Airlines and thus would have changed the tenor of the deal with Lufthansa. In addition, the SN deal was nothing new. LH has obviously been aware all along what the timeline would be for the deal and since it is already a 45% stake holder, it would be a simple accounting transaction that would close the deal for the remaining 55%.
What I think is happening is that LH sees a very fragmented LCC market in Europe, with far too many players involved which leaves only a few successful LCC operators such as EasyJet and Ryanair. LH sees opportunities to bolster its line up with potentially larger market players such as SAS or Condor as compared to SN and they simply are going through their due diligence to confirm they don’t miss a better opportunity elsewhere. With the sovereign ownership group of SAS being motivated to sell the airline, and Thomas Cook wanting to get rid of Condor who is saddled with 800 million euro in debt, LH might be able to get a fantastic bargain and at the same time at something new to the group, while still maintaining the SN stake.
Ultimately however, I truly feel that LH will take the path of least resistance and bring the rest of Brussels Airlines into the fold.
Just my 2¢……
