Lufthansa M&A Chief Bemoans Limit on Emerging-Market Investments

Deutsche Lufthansa AG (LHA) said curbs on airline mergers are limiting its ability to target emerging markets and channeling takeover activity into service operations where investment rules are less stringent.

Europe’s second-largest airline is particularly concerned given growth rates at Chinese and Gulf competitors, Isabel Todenhoefer, who heads Lufthansa’s mergers and acquisitions department, said today during a debate at an M&A conference.

“The regulatory environment when it comes to acquiring airlines outside of Europe is just very, very difficult,” she said at the conference in Frankfurt. “We hope that will change. We do think it’s important that we are a part of it.”

Lufthansa gets 65 percent of passenger and cargo sales in Europe and risks falling behind as travel grows faster in Asia, Latin America and the Middle East. The company hasn’t invested in a major foreign carrier since 2009, when it bought Austrian Airlines, London-based BMI and 45 percent of Brussels Airlines.

“We depend on growth and there is a lot in emerging markets,” Todenhoefer said, adding that a recent slowdown hasn’t altered Lufthansa’s world view. “We need to be present there. That’s where population growth is coming from.”

Major airlines have generally eschewed the minority stakes in overseas carriers available under current limits, with an investment spree at Etihad Airways PJSC the exception to the rule. Like European rivals, Lufthansa has pursued cost and revenue sharing pacts, teaming with United Continental Holdings (UAL) Inc. on trans-Atlantic flights, All Nippon Airways (9202) Co. in the Germany-Japan market and seeking a deal with Air China (601111) Ltd.

Lufthansa has found a partial outlet for its takeover ambitions in service businesses such as food and engineering, where the company is one of the industry’s biggest players after many other carriers outsourced non-flying activities.

“We have a lot of services companies,” Todenhoefer said. “Our catering business for example is very much involved in acquisitions.” Still, service deals in emerging markets are generally more successful when local partners are involved, mitigating against 100 percent purchases, she said.

To contact the reporter on this story: Richard Weiss in Frankfurt at

To contact the editors responsible for this story: Benedikt Kammel at Christopher Jasper

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