Lufthansa takes over Swiss

Swiss CEO, Christoph Franz (left), shakes hands with Lufthansa's Wolfgang Mayrhuber in Zurich Keystone

Germany’s Lufthansa has formally announced the takeover of Switzerland’s troubled national airline, Swiss.

This content was published on March 22, 2005 - 09:33

The Swiss government - the biggest shareholder of Swiss - said earlier on Tuesday that it supported the buyout.

In a statement, Lufthansa said both companies' boards and major shareholders had approved the deal worth up to €310 million ($409 million).

"The supervisory board of Deutsche Lufthansa and the board of directors of Swiss International Airlines today approved the business model jointly developed by both companies for the takeover and integration of Swiss into the Lufthansa group," the German carrier said.

It is the start of Europe’s biggest airline merger since Air France took over KLM last year to form the world’s largest airline group.

Under the plan, Lufthansa will offer to buy out the roughly 14 per cent of Swiss shares owned by small investors amounting to €45 million.

Larger shareholders including the government, Novartis, Nestlé and the banks, UBS and Credit Suisse, will receive an outperformance option giving them up to €265 million based on the relative performance of Lufthansa shares.

Zurich hub

The airline added that it wants to integrate Swiss routes into its 2005/06 winter timetable and maintain Zurich airport as an international hub.

And it said "Swiss is to remain a mostly independent airline with its management and seat in Switzerland [and] its own fleet and crew".

Lufthansa also confirmed reports that it was prepared to provide Swiss with two new long haul jets as long as "competitive cost structures are in place".

In response to the transaction, the Swiss government said it "assured Switzerland intercontinental connections in the long-term" and saved jobs.

The transport minister, Moritz Leuenberger, said the deal could pave the way for new bilateral talks with Germany on easing flight restrictions.

In 2003, Germany imposed the restrictions unilaterally on Zurich airport in a long-standing dispute over noise pollution.

Leuenberger said his German counterpart, Manfred Stolpe, had given written assurances that negotiations would be restarted. Leuenberger said resolving the dispute was key if Zurich airport was to remain competitive.

Staggered takeover

Due to antitrust laws and rules over landing rights, Lufthansa said the acquisition would be broken down into several steps.

The Swiss shares will be put in a new holding company (AirTrust) allowing Lufthansa in an initial phase to purchase 11 per cent.

After receiving antitrust clearance, the German airline will increase its stake to 49 per cent, and 100 per cent once air traffic rights are secured. The latter could take up to 18 months.

Swiss was launched three years ago following the collapse of Swissair and has been battling to cut costs and stem losses since then.

On Monday, Swiss announced that it had reached agreement on the terms of a new collective labour contract with some of the trade unions representing ground staff.

swissinfo with agencies

Key facts

Swiss was formed in 2002 by merging the remains of Swissair with the regional carrier, Crossair.
The Swiss government is the single biggest shareholder in the airline with a 20.4 per cent stake in Swiss.
The country's two largest banks, UBS and Credit Suisse, and the Zurich cantonal authorities each has a stake of around 10 per cent.

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