Etihad rebuffs reports of Lufthansa merger bid

dubai - The UAE airline said it is mere speculation

Etihad Airways, the UAE's second largest airline, on Tuesday rebuffed media reports about its talks with Germany's Lufthansa on a possible merger as mere speculation.

Reuters had quoted Italian newspaper Il Messaggero as reporting that executives from both airlines had for weeks been examining the possibility of Etihad buying a 30 to 40 per cent stake in Lufthansa through the sale of new shares to the Abu Dhabi state-owned airline in the first stage, followed by looking at the prospects of a full-blown merger, the paper said, adding that the parties would meet shortly to speed up talks.

"We don't comment on rumours or speculation," said an Etihad Airways spokesman when Khaleej Times asked for the airline's remarks.

The news, however, served to lift Lufthansa shares by six per cent on Tuesday. Lufthansa also declined to comment on what it described as "speculation."

Lufthansa and Etihad last month signed a flight code-sharing deal after Lufthansa agreed to lease 38 crewed planes from airberlin, which is part-owned by Etihad.

Analysts reacted with scepticism to the report, citing the foreign ownership rules governing international traffic rights, and questioning what the benefits for Lufthansa would be.

They also noted that any combination between the two would have an impact on loss-making Italian airline Alitalia, which is 49 per cent owned by Etihad and is in the midst of a major restructuring that will likely include job cuts and grounding of planes.

In Europe, an airline must by majority-owned by EU investors in order to maintain its traffic rights under international air service agreements.

Lufthansa is currently almost 69 per cent owned by German investors but 13 per cent is in the hands of US investors and a further nine per cent is owned by other nationalities.

In addition, if Etihad wished to buy more than 30 per cent of Lufthansa, it would have to make an offer for the company as a whole, according to German takeover rules.

Ever since Etihad announced it had taken a 29.21 per cent stake in 2011, the UAE carrier has been on a buying spree by acquiring stakes in seven more airlines across the globe, including airberlin, Air Serbia, Air Seychelles, Etihad Regional, Jet Airways and NIKI.

- issacjohn@khaleejtimes.com