Lufthansa (LHAG.DE) stock is up 0.32% in early morning trade after the company announced that they will exercise their option to takeover Brussels Airlines. The company will buy the remaining 55% stock for €2.6 million.
The deal will add 51 planes to the company’s fleet and expand its network in Africa.
Reuters reports that the buyout is low because Lufthansa loaned €45 million to the company previously. Lufthansa Eurowings will benefit from the acquisition at a time when Ryanair (RTA.I) and EasyJet(EZJ.L) have increased their market share. The two competitors offer short-haul flights and have forced market prices down.
Brussels Airlines will help Eurowings double in size to help compete in Eurozone.
European carriers are under pressure following security concerns and Brexit. Smaller airlines have struggled to remain afloat after terror attacks caused a lull in travel to some of the world’s most popular destinations.
Consolidation in the industry is expected to continue as smaller airlines are acquired by large entities that can withstand the sales dip.
Lufthansa Group will maintain a fleet of up to 180 following the acquisition. The group will have up to 700 aircraft in its fleet in 2017,which includes Austrian Airlines and Swiss International Air. The company will add around 100 airplanes to its fleet next year.
Lufthansa has been in the headlines a lot this week. The company had to divert a flight from Texas to Germany due to threats of a bomb. The company also threatened to downscale its Frankfurt operations over revised fees.
Labor woes have caused disruptions, as pilot strikes in November grounded planes for several days. A new dispute arose this week with the company’s Aerologic. Ver.di, a German trade union, announced plans to file a complaint against the company with the federal court.
The complaint is due to an argument over whether pilots can establish a workers’ council.
