September 26, 2017 / 3:15 PM / a year ago

Eyeing Air Berlin, Lufthansa board backs extra investment for Eurowings

BERLIN (Reuters) - Lufthansa’s (LHAG.DE) supervisory board approved plans to invest 1 billion euros ($1.2 billion) in up to 61 additional planes to expand its Eurowings budget business after German rival Air Berlin was declared insolvent.

FILE PHOTO: An Airbus A330 belonging to Lufthansa's low-cost brand Eurowings taxis on tarmac before its first long-haul flight to Havana, Cuba, at Cologne-Bonn airport, Germany, November 2, 2015. REUTERS/Wolfgang Rattay

Air Berlin’s creditors have selected Lufthansa and British budget carrier easyJet (EZJ.L) to negotiate over a carve-up of its assets.

The Lufthansa investment is set to be used for the purchase and lease of 41 A320 (AIR.PA) single aisle jets and 20 Bombardier (BBDb.TO) Dash 8 Q400 planes, Lufthansa said.

Those planes will likely come from Air Berlin, with Lufthansa saying the purchase or lease of the planes is “partly dependent” on a successful conclusion of talks to take over assets from Air Berlin AB1.DE.

Lufthansa has made an offer for Air Berlin’s holiday airline Niki, which flies 21 A320 family jets, regional unit Luftfahrtgesellschaft Walter, which flies 20 Dash 8 turboprops, plus some additional A320 planes, Air Berlin’s administrator said on Monday.

Lufthansa boss Carsten Spohr said last week that even if Lufthansa were unsuccessful with the Air Berlin bid, it would still expand Eurowings on its own.

Lufthansa has bid around 200 million euros for parts of Air Berlin, plus offer another 100 million euros to meet operating costs during a transition phase, a source has said.

Air Berlin, however, does not own its planes, but instead rents them from leasing companies, meaning any investor has to fund the planes separately.

Lufthansa has already purchased 20 A320 planes from Air Berlin as part of a lease deal agreed last year. Currently 33 crewed Air Berlin planes fly for Eurowings under the deal.

Lufthansa expects to need an additional 3,000 staff for Eurowings as a result of the expansion.

“We have a big opportunity to take a decisive step forward with Eurowings in Europe. The supervisory and management boards have agreed that we should seize this opportunity,” Spohr said in the statement.

The investment in Eurowings, which comes on top of Lufthansa’s planned capital expenditure of 2.7 billion euros this year, will be funded from available liquidity.

Reporting by Victoria Bryan; Editing by Arno Schuetze/Keith Weir

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