Lufthansa: Air Berlin takeover is just in time

Lufthansa is set to sign a deal to buy parts of Air Berlin, the failed German carrier. The deal was reported Thursday morning by the Rheinische Post and confirmed to Fortune by Lufthansa.
Germany's second-largest carrier filed for bankruptcy in August after its main shareholder, Etihad, said it would not give further financial support.

Lufthansa chief Carsten Spohr said Germany’s largest carrier will take over 81 of Air Berlin’s 140 leased aircraft and 3,000 of its roughly 8,000 employees, while investing €1.5 billion ($1.8 billion).

"We will see a milestone in the history of Lufthansa and Air Berlin today," Lufthansa chief executive Carsten Spohr told Rheinische Post.

A person familiar with the matter had told Reuters yesterday that Lufthansa, Germany's largest airline, was set to buy Air Berlin's Niki leisure unit, its LG Walter regional airline and some additional short-haul aircraft. 

Spohr said he expected the imminent deal with Air Berlin to receive European Union approval by the end of the year, allowing operations to stabilise within about six to nine months. 

EasyJet, which has a base at Berlin’s Schoenefeld airport, has been discussing acquiring 27 to 30 planes, though a media report earlier this week said talks could fail.

Analysts at Bernstein Research raised their rating on Lufthansa’s shares to “outperform” from “market-perform”, saying they expected a deal with Air Berlin to add around 70 to 90 million euros to annual operating profits at Lufthansa’s budget unit Eurowings in the medium term.

HSBC analysts lifted their target share price to 29 euros from 25 euros, citing the imminent agreement with Air Berlin, a new multi-year labor deal with pilots announced this week and a positive trading performance this year.

Air Berlin, Germany’s second largest carrier, will cease operating flights this month, capping a turbulent summer for European carriers.