What are the chances that Lufthansa ends up owning at least parts of Alitalia and Condor? It doesn't seem enthusiastic about either, but it might be better than letting a competitor get hold of them — as long as regulators agree.
Consolidation might be the big buzzword in European aviation at the moment, but Lufthansa Group has distanced itself from two potential deals. But, of course, being aloof is sometimes part of a strategy.
A Reuters story at the end of last month suggested the German airline group was willing to invest $223 million (€200 million) in struggling Alitalia as part of a rescue deal.
However, speaking on an earnings call with analysts after the release of Lufthansa’s third-quarter results, CEO Carsten Spohr implied that a deal was still in the balance.
“On Alitalia, our position has not changed. We have said numerous times, we’re not interested to invest into the current Alitalia. We are interested to look at a restructured new Alitalia, if it makes sense to us and our shareholders, our staff and our customers due to the importance of the Italian market. So nothing new on this as I just stated,” he said on Thursday.
Despite Spohr’s cautious tone, analysts at broker Bernstein are worried about the possibility of a deal emerging,
“Lufthansa seems interested in the asset and will need to buy it then restructure. We are concerned that this remains a challenging undertaking fraught with risk and urge the executive team to think very carefully before committing any more capital to the business,” they said in a note to investors.
Another airline linked with Lufthansa in recent times is Condor, formerly part of Thomas Cook, the UK-based travel company that collapsed into liquidation in September.
Condor was previously owned by Lufthansa and made a move to re-acquire the company earlier this year, when Thomas Cook effectively put its airline business up for sale.
A deal failed to materialize, and having managed to extricate itself from the rest of Thomas Cook, Condor is on the lookout for a new owner. It is unlikely, however, to be Lufthansa.
Ulrik Svensson, chief financial officer said on the call that not only was the carrier a “low-margin business” but for competition reasons “we could not buy Condor as it stands today.”
Asked later on about buying only its long-haul operations, he said that option didn’t seem viable given the fact that Condor is “selling the business as a whole”.
While, Lufthansa might be lukewarm on acquisitions it has initiated the sale of one of its subsidiaries: catering business LSG Group.
The first part of the disposal will include the European businesses.
The third-quarter update coincided with another round of strikes at the company with a cabin crew walkout forcing the cancelation of 1,300 flights on Thursday and Friday. The action only affects Lufthansa flights.
The 48-hour strike follows previous walkouts at other group airlines with the possibility of more action to follow.
Svensson put the cost impact of between $11 million (€10 million) and $22 million (€20 million) per day.
CEO Spohr met with two of the three main unions on Wednesday evening and said that the company is now in a position to enter talks.
In the three months to the end of September, Lufthansa reported an 11.6 percent rise in pre-tax profit to $1.7 billion (€1.5 billion), beating analysts’ expectations. Revenue increased 2.2 percent to $11.3 billion (€10.2 billion).
The company has endured a difficult 2019 but it looks set to benefit from capacity reductions by airlines across Europe over the winter.
A turnaround at subsidiary Eurowings has also helped Lufthansa. The low-cost carrier is now focused on short-haul flights. Operating profit (EBITDA) at the unit rose 37 percent to $185 million (€167 million) in the quarter.
Photo credit: A Lufthansa a350. The carrier group has been linked with bids for two other airlines. Lufthansa