Author: Ines Haitzinger, 0753017 Supervision: Dr. Christian Herbst, LLM and Dr. Sascha Hödl, LMM Date: April 30, 2011
11. INTRODUCTION: BRIEF BACKGROUND INFORMATION ON LH AND AUA The Lufthansa Group, which is led by its parent company Deutsche Lufthansa AG, is a listed company that has more than 400 subsidiaries and affiliates. Approximately 108.200 people work for the Lufthansa Group, which registered EUR 22.4 billion in the fiscal year of 2007. Within the last five years, the operating margin of the group has improved by a total of 5.5 percentage points to 6.9 % in the fiscal year 2007. Deutsche Lufthansa Group is meanwhile being regarded as one of the most profitable airlines in Europe. The group is active in five business segments, Passenger Transportation, Logistics, engineering (MRO), IT Services and Catering. Each of which holds a leading position in their respective industry. Passenger transportation offers mobility not only for passengers but also for freight. The Passenger Transportation segment has been growing substantially in the past business years with the tendency of continuous increase in profitability. Following companies are part of the groups Passenger Transportation business segment: Lufthansa, City line, Euro wings, SWISS, Air Dolomiti, German wings. Furthermore, it includes stakes in British Midland, Sun Express and JetBlue. The Austrian Airlines Group was a publicly traded company that unites three strong brands: Austrian Airlines, Lauda Air and Tyrolean Airways. Austrian Airlines started its “Focus East” in 2004 and offers a dense route network and functions as a hub between East and West, centered on Vienna and focusing on services to Central and Eastern Europe and the Middle East, completed by flights to Northern America and Asia. “Focus East” is supported by ongoing improvements in performance at the Group’s Vienna hub and the realization of synergies within the structure of the Star Alliance. The Austrian Airlines Group already maintains a dense network and an outstanding market position in these regions. The Group is the market leader in Central and Eastern Europe with 48 destinations in 25 countries. Due to the global crisis of stock and financial markets, the Republic of Austria has recognized the necessity of a reorientation of Austrian Airlines, beginning with a privatization mandate. AUA’s stand-alone strategy couldn’t be continued successfully, as the company results were worsening over the past years. As financial situation has become very bad in 2008, the Government of Austria authorized ÖIAG to sell up to 100 % of its shares. The idea was to find a strategic investor that could improve AUAs economic situation. Therefore, there has been called out an auction. Not only the strongest bidder Lufthansa, also other competitors in the airline sector Air-France and S7 were interested in a merger with AUA.
International M & A
What advantages would a merger bring for Lufthansa?
Lufthansa has been a steadily growing company in size and in revenues. LH views international air transport as growth industry and that a strong aviation sector is crucial for Europe, not only for European business, also for Europeans as a whole. In general, Lufthansa’s strategic alignment is aimed at generating profitable growth in this environment. AUA, on the other hand, is dominating the Austrian market and has been focusing on its East strategy, where it became a mayor player concerning flight schedules and partnerships. The consolidation would also already be a step in the path of growth and strengthening the European Aviation market. It will enable LH and AUA to strengthen their joint competitive position, and makes the Lufthansa Group the strongest carrier in Europe. This could furthermore bring advantages for the company, as the airline sector is a very...