BRUSSELS/FRANKFURT, Sept 15 (Reuters) – Germany’s Lufthansa has agreed to pay up to 250 million euros ($350 million) for smaller Belgian rival Brussels Airlines to expand its flight network and add premium travellers.
Lufthansa, which is seen as one of the key players in the consolidation of the struggling European airline industry, has been linked to a number of other carriers — including loss-makers Alitalia, Austrian Airlines and Scandinavia’s SAS.

The German carrier on Monday confirmed it planned to buy a 45 percent stake in the airline for 65 million euros, with an option to buy the rest from 2011. The total price would depend on performance-related factors and initially on 2010 results.

Lufthansa Chief Executive Wolfgang Mayrhuber said the purchase was a further sign of his company’s transformation from a purely national carrier to a ‘European airline system’ able to compete with Asian and North American giants.

Brussels Airlines would bring a prime location where the European Union and NATO are based, logistics experience and a wide network, notably including many flights to and from Africa.

It would operate as a largely independent carrier and retain its brand, as well as its headquarters and management in Brussels. It would also likely join the Star Alliance global network, of which Lufthansa is a member.

The German carrier added that it expected to be able to achieve a mid-double-digit million-euro improvement in earnings and costs annually within three years of regulatory approval by combining the airlines.

This would come from greater leverage in costs, such as purchasing planes, and from higher revenues from more routes. Job cuts were not initially envisaged.

Mayrhuber declined to say more than that the German company was on the look out, but that its profitability was the number one concern.

‘We are looking at all options that are coming up but we are not confirming anything,’ he told a news conference.

Brussels Airlines first flew as a single operator in March 2007 after the 2006 merger of British entrepreneur Richard Branson’s budget carrier Virgin Express and SN Brussels Airlines, the successor of state airline Sabena.

The two airlines had been brought under the control of SN Airholding in 2004. A group of companies and regional investment funds hold 70 percent of Brussels Airlines, Virgin the rest.

It carried 5.8 million passengers in 2007, compared with Lufthansa’s 63 million. Its revenue rose 2 percent to 921 million euros and consolidated net profit shot up 66 percent to 23.1 million euros.

Lufthansa, which is seen as one of the key players in the ongoing consolidation of the European airline industry, added that the acquisition still needed approval from regulators, Lufthansa’s supervisory board and the board of directors and shareholders of SN Airholding.

BAE Systems Regional Aircraft has signed a contract with Brussels Airlines, based in Belgium, for the sale and leaseback of three Avro RJs.

The three aircraft are expected to be acquired during 2009 and will be immediately leased back to the airline.

Brussels Airlines signed a similar deal with BAE Systems in 2005, covering 23 of the airline’s fleet of 26 Avro RJ85/100s so this completes sale and leaseback on the entire Avro fleet. These aircraft are being acquired by BAE Systems in stages over a five-year period.

The aircraft covered by the new contract are being handled separately because they were the subject of a separate financing structure.

No financial terms have been disclosed.

Belgium’s Brussels Airlines has announced it is slowing speeds and reducing weight on some of its aircraft in order to reduce fuel costs.

The airline said slowing its planes by about 10km/h would cut its annual fuel bill by 1m euros ($1.6m; £800,000) and add a minute or two to flight times.

The measures will also reduce the airline’s emissions of global warming greenhouse gases, a spokesman said.

Oil prices have risen steeply recently, adding hugely to airlines’ costs.

Brussels Airlines is looking at nearly 100 ways of cutting fuel use, including more efficient fuel use and reducing weight on its planes.

Harmonised air system

The airline’s fleet of 30 Avro aeroplanes, flying short routes within Europe, can be flown at slightly slower speeds, airline spokesman Thierry van Eyll told the BBC.

The remaining 19 planes, flying longer routes to Russia, the Middle East and Africa, fly at pre-set speeds and cannot be slowed down, he said.

Other options to cut down on fuel use and reduce weight are carrying less water, getting rid of built-in stairways on planes and adding angled tips to wings to reduce drag on take-off.

Brussels Airlines is also putting pressure on the EU to adapt a harmonised air system.

The current system often forces planes to fly a zigzag route over Europe as they pass over different countries’ airspaces.

This measure alone would result in a significant savings of aviation fuel and therefore produce fewer polluting emissions, Mr van Eyll said.