Lufthansa AG

Lufthansa AG

21 September 2016

Important legal information

Europe's largest airline, Lufthansa Airlines, has entered into an agreement to cooperate with one of China’s major airlines – Air China. For two years, the two companies negotiated the joint venture for the route between Germany and China. On Tuesday morning in Beijing, October the 20th, the cooperation was finally agreed upon when Lufthansa CEO Carsten Spohr and Air China chairman Cai Jianjiang signed the far-reaching partnership agreements.

The cooperation is an important step and the aim is to jointly market and better coordinate the flight routes between Europe and China as well as to increase the efficiency of the usage of airplanes. The two companies are already known to each other for nine years through "Star Alliance". The Star Alliance is the largest airline alliance in the world with 28 members together carrying approximately 641 100 000 passengers per year with a joint fleet of 4,657 aircrafts.

 

The cooperation with Air China is Lufthansa’s third business collaboration in Asia. In 2012, Lufthansa agreed on its first partnership in the region with the Japanese airline All Nippon Airways and in 2015 Lufthansa and Singapore Airlines agreed on a collaboration.

 

Lufthansa is interested in buying flight routes from Air Berlin – according to an article in the German newspaper Süddeutsche Zeitung, Lufthansa will rent approximately 40 aircrafts including crew from Air Berlin as of October 31st 2016. Moreover, rumors say, Lufthansa is also interested in a collaboration with Etihad Airways, an airline with major shareholding in Air Berlin. However, no official comment from the three companies have been published in regards to the matter.

 

Lufthansa’s main competition stems from low cost airlines, Ryanair and Easyjet to name a few. In order to conquer this competition, Lufthansa may focus on fulfilling the needs of the well-paying business customer segment and emphasize its leading role in offering high quality services.

 

Furthermore, since the failure of the last ongoing explanatory talks together with the union Vereinigung Cockpit (VC), Lufthansa has been concerned over upcoming pilot strikes, an ongoing topic to follow. In the second quarter of 2016, Lufthansa had a turnover of 8.13 billion euros and earnings per share of 0.94 euros, however, year over year sales fell by 3.1%.

 

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Bloomberg consensus set the 12-month target price to EUR 9,77 and as of October 21th 2016, the share price of Lufthansa opened at EUR 10,41. According to Bloomberg, 2 (7%) analysts set Lufthansa on BUY, 11 (38%) on HOLD and 16 (55%) on SELL recommendation.

04/12/2020 21:33:47