Lufthansa buys 26% stake in Lauda Air

LUFTHANSA is taking a 26.5 per cent stake in Lauda Air, the rapidly expanding Austrian airline founded by Niki Lauda, former world motor racing champion.

At the same time Lufthansa's chairman, Jurgen Weber, told the annual meeting in Nuremberg that the lossmaking airline, 51 per cent state-owned, faced a 'long haul before the current tough economy measures take effect'.

Lufthansa confirmed that in the first five months of this year it suffered an operating loss of DM600m ( pounds 208m), overtaking the net loss of DM445m for the whole of 1991.

Mr Weber said the move into Lauda Air was designed to strengthen Lufthansa's strategic position in Austria and south- eastern Europe. The first joint developments will be transatlantic flights from Vienna via Munich to Miami and Los Angeles.

Lufthansa is taking the stake through its charter subsidiary, Condor, which is also buying a 26 per cent share in the tour operator ITAS, which markets most of Lauda Air's services in Austria.

The 26.5 per cent stake will be acquired by paying 200 million schillings ( pounds 9.87m) for new shares in the Austrian airline, where Mr Lauda remains chief executive.

Mr Weber - blaming Lufthansa's poor performance on continued weak demand, overcapacity and competitive pressures - underlined the urgent necessity of pressing ahead with tough cost- cutting measures. Management is negotiating a pay freeze as well as an extension in working times. Reductions in the workforce are considered inevitable.

The pressure on Lufthansa on its home territory is likely to increase with the recent start-up of Deutsche BA, British Airways' new German subsidiary.

BA bought up a small regional German airline, Delta Air - in which it has a 49 per cent stake, the rest owned by German banks - and has transformed it into its main continental vehicle, both to compete against Lufthansa and to take advantage of the 1993 market opening.

At present only serving limited destinations in southern Germany and Switzerland, Deutsche BA is set to expand rapidly in terms of both aircraft and routes, which will eventually cover all the main European ones as well a few transatlantic routes.

Initially Deutsche BA is seeking to win market share by offering a signifcantly better in-flight service than Lufthansa, which no longer serves meals on internal flights, before moving later to pressure on ticket prices.

(Photograph omitted)