Lufthansa on Acquisition Trail, Eyes UK's BMI

European airlines took another step down the consolidation path on Wednesday and Deutsche Lufthansa seems to be leading the pack.

The German flag carrier made a move on Britain's bmi and gained headway in the bidding for Austrian Airlines.

The number of airlines being put up for sale seems to rise by the day, and Wednesday saw yet another.

Danish low-cost carrier Sterling announced it was filing for bankruptcy, adding to the already frenetic pace of mergers and acquisitions in the industry.

Lufthansa said bmi founder Michael Bishop exercised an option requiring the German carrier to buy his 50 percent plus one share stake in bmi.

The move would raise Lufthansa's stake in the carrier to about 80 percent and would give it access to bmi's slots at Heathrow airport, estimated to be worth a billion euros. But Lufthansa is not the only one interested in bmi.

Virgin Atlantic's Chief Executive Steve Ridgway told Reuters bmi would be a good match for his airline and make it a stronger competitor to Heathrow kingpin British Airways.

Virgin says it has 3 percent of slots at Heathrow, London's main airport, while bmi has 12 percent and BA over 40 percent.

Analysts have said that consolidation in the airline industry would speed up as more and more carriers were hurt by high fuel prices and weakening demand for air travel.

A number of airlines are currently up for sale, and Lufthansa is also touted as a possible buyer for Austrian Airlines (AUA), Alitalia and SAS.

"These are golden times for Lufthansa to make sensible acquisitions," said LBBW analyst Per-Ola Hellgren.

Shares of SAS jumped more than 20 percent after the Icelandic-backed Nordic budget airline Sterling said it had grounded all its aircraft after talks with potential investors to save the airline had failed.

Fuel Prices Ease

Sterling's collapse could ease price competition for SAS, which has struggled with rising costs and rivalry from low-cost carriers in recent years.

Elsewhere, the Austrian government caved in to Lufthansa's demands to take on some of Austrian Airlines' debt prior to a sale.

Lufthansa's Chief Executive Wolfgang Mayrhuber said he wanted a "fair" split of the carrier's debt.

Austria, which wants to sell a 42-percent stake in indebted AUA on Wednesday pledged to cough up 500 million euros ($637.3 million), accounting for almost half the carrier's debt, to underpin the sale of its loss-making airline.

Shares in Austrian Airlines rose 16.7 percent to 2.80 euros, while Lufthansa's stock was up 6.4 percent.

Sluggish consumer spending has chipped away profitability, just as oil prices easing off from record highs promise to take pressure off airlines' massive fuel bills.

Air France-KLM and Austrian Airlines have both issued profit warnings in the past two weeks, and Lufthansa followed suit on Tuesday.

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