Lufthansa to sign deal with bankrupt Air Berlin

Lufthansa to sign deal with bankrupt Air Berlin

German airline group Deutsche Lufthansa AG (DLAKF, DLAKY) will sign a deal on Thursday to buy parts of insolvent rival Air Berlin, reports said, citing Lufthansa's chief executive Carsten Spohr.

Air Berlin filed for insolvency in August, after main shareholder Etihad refused to provide further financial support.

While Air Berlin and Lufthansa's low-priced branch Eurowings are the only carriers serving routes such as between Munich and Cologne, Spohr said the deal won't mean rising prices as competition "will intensify in Europe and worldwide".

"We will see a milestone in the history of Lufthansa and Air Berlin", Spohr said. The deal comes only a day after Lufthansa pilots ended a dispute over pay and conditions stretching back over a year, which had involved repeated strike action and the loss of customer confidence.

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Spohr told the daily Rheinischen Post on Thursday that Lufthansa plans to invest 1.5 billion euros in taking over 81 Air Berlin aircraft - about half of the carrier's fleet - and hiring 3,000 of its employees.

While it conducted the negotiations, Air Berlin's planes were kept in the air by a government loan of 150 million euros.

Analysts at Bernstein Research raised their rating on Lufthansa's shares to "outperform" from "market-perform", saying they expected a deal with Air Berlin to add around 70 to 90 million euros to annual operating profits at Lufthansa's budget unit Eurowings in the medium term.

However, on Monday, Air Berlin announced that it would end all flight services by October 28. The airline carried some 80,000 people a day mostly on short-haul destinations.

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