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Lufthansa's Eurowings Says Bookings Strong; Lufthansa Aims For 20% Stake In ITA Airways - Source; In Talks To Sell 20% Of Maintenance Arm - Sources

By Dave Simpson

Lufthansa's LHAG.DE budget carrier Eurowings said on Wednesday 25 May that it was not seeing fewer bookings due to consumers' worries about inflation and recession amid the war in Ukraine.

"We have had concerns that consumers' worries might cloud booking numbers. However, bookings are getting better every day - yesterday, again, we had some 1,000 more compared to last year," Eurowings chief executive Jens Bischof said.

He added that the airline planned to offer more seats this summer than in 2019, before the COVID-19 crisis, but that it could not predict when it would return to profit as it still needed to see to what extent it could pass on oil price fluctuations to customers.

Lufthansa Aims For 20% Stake In ITA Airways - Source

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The above news followed news that Germany's Lufthansa LHAG.DE wants to acquire a 20% stake in state-owned Italian airline ITA Airways, the successor to Alitalia, and its partner MSC is bidding for a 60% stake, a person familiar with the matter told Reuters on Tuesday 24 May.

The Italian state would initially keep the remaining 20%, the source said. The Lufthansa-MSC duo made their offer to acquire a majority stake in ITA on Monday 23 May.

MSC, also known as Mediterranean Shipping Group, has filed an offer together with Lufthansa and is awaiting the next steps, a company spokesperson said, declining to comment further.

The Italian Treasury did not reply to a request for comment on the sale process after the deadline for bids on Monday 23 May.

MSC and Lufthansa face a rival bid from U.S. financial investor Certares which is working with Air France-KLM AIRF.PA and Delta Air Lines DAL.N.

Delta confirmed on Tuesday that it would not be a financial investor in ITA, but said in a statement that it would seek to build on an existing commercial partnership with ITA.

Air France-KLM declined to comment on ITA on Tuesday 23 May.

It has launched a €2.26 billion share sale to shore up its balance sheet and repay some French state aid, bringing it closer to repaying government pandemic support and meeting European Union conditions for participating in any future airline consolidation.

Italian media reports said that the Alitalia successor was worth between around 1 billion and 2 billion euros. A Lufthansa spokesperson did not want to comment on the figures.

A decision is expected in the coming weeks about which of the two bidder groups will be invited to launch exclusive negotiations. Italy is aiming to complete a sale by the end of June.

Lufthansa In Talks To Sell 20% Of Maintenance Arm Technik - Sources

All of the above news followed news that Lufthansa LHAG.DE is holding talks with buyout funds as it seeks to sell approximately 20% of its aircraft maintenance business Technik, three sources familiar with the matter have told Reuters.

The German airline has abandoned plans to list a minority stake in the business given stock market volatility after Russia's invasion of Ukraine, the sources said, speaking on condition of anonymity.

Citigroup C.N and JPMorgan JPM.N are advising on the stake sale which could value Technik, one of the biggest global players in aircraft repair, at €5 billion to €8 billion including debt, two of the sources said.

Private equity firms are working to prepare bids for a 20% stake ahead of an auction process which is expected to kick off later this year, one of the sources said.

Lufthansa is seeking a long-term investor and would only pursue a stock market listing of Technik at a later stage, this source said.

The decision comes days after Air France-KLM AIRF.PA said it had entered talks with private equity firm Apollo Global Management APO.N for a €500 million injection into a repair unit as airlines reshape balance sheets post-pandemic.

In June 2020, the European Commission approved German plans to contribute six billion euros to the recapitalisation of Lufthansa's parent company Deutsche Lufthansa AG.

Global airlines are facing competition from standalone maintenance firms in Asia and elsewhere, and increasingly from airplane manufacturers themselves, in the expanding market for overhaul and other services.

Chief executive Carsten Spohr said during an analyst call in March that Lufthansa wants to finalise a deal for Technik in 2023 as part of its recovery strategy emerging from the coronavirus pandemic.

Lufthansa is also looking to divest the US business of its subsidiary LSG Group, an airline catering and hospitality service provider which it considers a non-core asset, two of the sources said.

It sold the European operations of LSG to Swiss airline catering firm Gategroup in 2019.

Meanwhile, Lufthansa has teamed up with shipping group MSC on a joint bid for ITA Airways, the successor to Alitalia.

Lufthansa Sees No Significant Restructuring Costs In 2022

All of the above news followed news that German flag carrier Lufthansa LHAG.DE has said that it sees no further significant restructuring costs this year, a relief after reorganisation efforts amid the COVID-19 pandemic weighed on its results in late 2020 and throughout 2021.

The reason is that Lufthansa completed most of its planned restructuring measures in 2021 and booked the related costs in its statement for that year, the group said in a written answer to a question as part of its virtual annual general meeting.

The carrier added that it would sell the rest of its LSG catering unit - the European business of which it span off in 2020 - as soon as it can get an offer that corresponds to its value, which would mainly depend on further recovery in the industry.

Lufthansa is prepared to carry out the transaction even at short notice, the carrier said.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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