May 22 (Bloomberg) -- Deutsche Lufthansa AG, Europe's second-biggest airline, and Brazilian carrier TAM SA plan to sell seats on each other's flights in a move that could enable TAM to join the Star Alliance group of airlines.

The proposed code-sharing agreement includes the sale of seats for domestic and international flights, Lufthansa said in a statement today. The Cologne, Germany-based airline said in a separate statement it plans to create a similar arrangement with El Salvador's Taca International Airlines.

The plan would make it easier for the airlines' customers to catch connecting flights in Europe and Latin America. Lufthansa is a founding member of the Star Alliance group of airlines, which on Jan. 31 kicked out its only South American partner, Brazil's Varig, after the carrier filed for bankruptcy.

``It's a fact that Lufthansa and the Star Alliance are weakly represented in South America,'' Nils Machemehl, an analyst at BHF-Bank in Frankfurt with a ``buy'' recommendation on Lufthansa shares, said in a phone interview today. He said he could ``well imagine'' TAM joining the alliance.

Today's Lufthansa-TAM accord follows a similar arrangement last week between the Sao Paulo-based carrier, Brazil's largest, with UAL Corp.'s United Airlines, the world's second-biggest airline. Chicago-based United is also a founding member of the Star Alliance.

Lufthansa began cutting service to South America last year and shifted capacity to Asian routes.

Markus Ruediger, a spokesman for the Star Alliance in Frankfurt, declined to say whether the group has been in talks with TAM to succeed Varig as a Brazilian member.

Examining Options

``Brazil is a market we are keeping a close eye on and we are examining all our options,'' Ruediger said. The Star Alliance counts 17 member airlines including Lisbon-based TAP SGPS SA and Singapore Airlines Ltd., the world's largest carrier by market value.

Lufthansa said it may also coordinate flight schedules with TAM and Taca, pool frequent-flyer programs and offer mutual access to airport lounges for passengers.

Lufthansa and TAM, which signed a memorandum of understanding yesterday, aim to complete a final partnership agreement in the second half of the year and may start selling seats on each other's flights in 2008, Sandra Kraft, a Lufthansa spokeswoman in Frankfurt, said in a phone interview today.

Lufthansa and Taca

The memorandum of understanding with Taca was signed today and may be implemented this year as well, Lufthansa said separately in an e-mailed statement. Taca operates flights from hubs in El Salvador, Costa Rica and Peru to 35 cities in North and South America.

Lufthansa and Swiss International Air Lines Ltd., which the German carrier is taking over, operate 20 flights a week between Sao Paulo and Frankfurt, Munich and Zurich. TAM serves 49 domestic and seven international destinations, including New York, Paris and London. The airline has an agreement with Air France-KLM Group SA, Europe's biggest airline, to sell tickets for each other's flights.

``We are delighted to have found with TAM a professional and reliable partner in the Brazil growth market,'' Goetz Ahmelmann, Lufthansa's vice president for alliances, strategy and subsidiaries, said in the statement.

Shares of Lufthansa rose 4 cents, or 0.2 percent, to 21.02 euros in Frankfurt. The stock has gained 0.8 percent this year, valuing the airline at 9.63 billion euros ($13 billion).

To contact the reporter on this story: Jann Bettinga in Frankfurt at jbettinga@bloomberg.net.

Last Updated: May 22, 2007 18:11 EDT