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Lufthansa gets EU nod for Swiss airline takeover



15 July, 2005: Lufthansa AG has received European Union’s (EU) approval to proceed with its proposed $374.7 million takeover of Swiss International Air Lines, with certain terms. The approval would enable the German carrier to complete the proposed takeover by 2006 at the earliest and help it consolidate its position as a major global airline.

EU approval came after US antitrust regulators gave their clearance to the deal. However, there are certain riders to the approval, with the EU asking the carrier to surrender slots at several airports, including hubs in Zurich and Frankfurt, the company said in a statement.

Both the airlines would also to give up slots at Munich, Duesseldorf, Berlin, Vienna, Austria, Stockholm, Sweden, and Copenhagen, Denmark.

Last year, the European Commission had set similar conditions for Air France’s takeover of Dutch carrier KLM.

After the acquisition, Lufthansa intends to maintain the Swiss brand and run it as a separate Swiss-based airline operating from its hub in Zurich.

The EU said its investigation into the deal found that competition was reduced the most on the Zurich-Frankfurt and Zurich-Munich routes, while competition on long-haul routes to the United States, South Africa, Thailand and Egypt would be affected.

However, in an attempt to boost competition, the airlines have pledged to offer slots on the Frankfurt and Munich routes to new operators. A total of 41 round-trips a day will be available for competing airlines on these routes.

The EU also got assurances from the Swiss civil aviation authority that it would give traffic rights to other carriers wanting to stop over in Zurich on flights to the US.

Lufthansa, Europe's third-largest passenger airline, next only to British Airways and Air France-KLM, decided in May to buy troubled Swiss carrier. Swiss International Air Lines was racking up losses of $1.64 billion since its creation three years ago.

Earlier, Lufthansa has said it wants to acquire Swiss Air Line to expand its international network and boost its competitive position in Europe.

The German airline is paying up to €265 million to Swiss’ shareholders, including the Swiss government and certain companies, and about €45 million to individual investors whose shares are in free float.



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