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Lufthansa wants lower dividend to shareholders but keeps acquisitions plans, stake in BMI first!
By Amarendra Bhushan for CEOWORLD Magazine Updated:October 29, 2008
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Deutsche Lufthansa AG, Europe’s second-biggest airline, wnats to pay a lower dividend to shareholders, Chief Financial Officer Stephan Gemkow said. Investors are already facing a smaller payout than some may have hoped after Lufthansa on cut its full-year operating profit target to 1.1 billion euros from almost 1.4 billion euros. The carrier’s dividend policy generally sees about 40 percent of profit being paid to shareholders.
Nonetheless, the airline was still considering making acquisitions, Chief Executive Wolfgang Mayrhuber said on Wednesday. Lufthansa is bidding for Austrian Airlines, and Mayrhuber said he also expects to be approached when the Alitalia consortium is ready to search for a partner for the loss-making carrier and a controlling stake in BMI to increase its offerings at London Heathrow airport after the U.K. carrier’s chairman exercised an option to sell.
Where as Lufthansa Chief Executive Officer Wolfgang Mayrhuber said at a press conference in Frankfurt. The option won’t be exercised before Jan. 12. Lufthansa already owns 30 percent of BMI and SAS AB holds 20 percent, BMI spokesman Anthony Carew said. Lufthansa will gain slots at Heathrow, Europe’s busiest airport, where BMI is the second-biggest operator, after British Airways Plc. European airlines are adding routes under an “open skies” treaty that allows them to fly to the U.S. from cities outside their home countries.
In another news Virgin Atlantic has proposed combining its operations with Lufthansa to create a European super-carrier following the German national airline’s €400 million (£318 million) acquisition of Britain’s bmi.
Lufthansa now owns 80 per cent of bmi, the former British Midland, and is expected to make a bid for the remaining 20 per cent, which is owned by Scandinavian Airlines (SAS). SAS has put both the stake and itself up for sale.
Virgin Atlantic, the airline owned by Sir Richard Branson, today responded to the purchase of bmi by offering to combine its own operations with Lufthansa’s in a partnership that would create Europe’s dominant airline.
A tie-up with Virgin would allow the German carrier to use the better-known Virgin brand to expand internationally and at Heathrow in particular. It’s another sign that Lufthansa is likely to be one of the big winners from the current consolidation in the airline industry, which has had a pretty turbulent year thanks to the soaring oil price and falling passenger numbers (for some at least). With a stronger balance sheet than most of its rivals, it’s already bought a sizeable stake in Brussels Airlines, and it’s negotiating to buy chunks of ailing carriers Austrian Airways and Alitalia. By taking control of BMI – and by extension becoming the second-biggest carrier at Heathrow, Europe’s busiest airport – it’s strengthening its position even further.
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