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lufthansa buying into United?

Tuesday 26 February, 2008

I saw this article by Julie Johnsson in the Chicago Tribune German carrier circling UAL deal  This is absolutely no surprise, given the strength of the Euro/weakness of the US$.  We should expect to see more of this direction of acquisition.

What is a surprise is that this M&A dance is so public.  Many times discretion keeps prices in line, but in this case, speculation could be fueling price swings.

What’s curious about all this is that Lufthansa, which is still partially owned by the German government, is calling for the U.S. to relax its restrictions on foreign investment in airlines.  Both governments have maintained that keeping their airlines locally-owned, (at least majority stakes), is important to protect “the national interest.”   I guess the underlying assumption is that when going to war, there may be a need to move lots of people great distances quickly, & that domestic governments want to maintain control over those decisions & their implementations.  That American airlines were targeted on Sept. 11, 2001, says to me there may be big advantages to globally-owned airlines.  There certainly didn’t seem to be any advantage to nationality of airlines in the days following that event.  I think there may be great opportunity in freeing airlines in the capital markets to open up their funding sources.  Alternatively, I will also say Europeans should open up ownership of their airlines as well.  I was in Europe the month after 9/11 & flew Swiss Air, which went into bankruptcy while I was there.  I made if back home fine, but it was a bit harrowing not knowing whether or not I’d be flying with that airline or how I’d get home.  Governments sitting on boards of directors & exerting their bureaucracies on the management of companies in very competitive industries can’t help them compete better.

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