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Lufthansa examining SAS takeover: sources

German airline Lufthansa is examining a takeover of Scandinavia’s SAS to bolster its position in Europe’s consolidating airline industry, sources familiar with the matter told the media.

“Exclusive negotiations are being held,” one of the sources said, adding that SAS had approached Lufthansa about a possible deal in May. But the sources stressed that a takeover of SAS was not a foregone conclusion. “Whether this leads to a deal remains open,” said another source with knowledge of Lufthansa’s strategy. “It’s not fully clear yet where this will go.”

A spokesman for Lufthansa declined to comment. SAS was not immediately available for comment. Lufthansa is seen as one of the major consolidators in Europe along with Air France KLM and British Airways in an industry that is struggling to cope with soaring fuel prices and weakening economies.

SAS, which is 50% owned by the Swedish, Norwegian and Danish governments and over 7% by the Wallenberg family, is a partner with Lufthansa in the global Star Alliance. A tie-up could cement market shares between Germany and Scandinavia and provide feeder traffic for Lufthansa’s hubs.

The German carrier, Europe’s second biggest, is looking at a number of possible partners, including Alitalia, Poland’s LOT and Austrian Airlines. Lufthansa also plans to take a 45% stake in fledgling carrier Brussels Airlines with the option to buy all of the company. Any acquisition could be discussed at the next meeting of Lufthansa’s non-executive supervisory board on Sept. 24. The agenda for the meeting includes a blank item simply saying “further financial investments”, another source said.

Buying SAS, with a current market value of around €830 million ($1.16 billion), only one-seventh the size of Lufthansa, would push the German airline closer in size to Air France KLM, measured in passenger traffic. SAS shares have risen around 18% in the past 3 months, putting them among Europe’s strongest airline stocks, but over the past year they have tumbled over 60%, making them the worst performer over that period.

Competitor British Airways plans a transatlantic tie-up with Iberia and American Airlines, taking advantage of the US/EU ‘Open Skies’ agreement earlier in the year. Air France KLM, meanwhile, has been looking at buying Alitalia. (Reuters)