Thomas Cook to sell charter airline Condor Flugdienst to Air Berlin

22 September 2007

Air Berlin, Germany''s biggest discount airline, has reached agreement to buy Condor Flugdienst from tour operator Thomas Cook for up to €475 million ($669 million, Rs2,664 crore) in stock. This would give the UK-based Thomas Cook a 29.99-per-cent stake in Air Berlin, Thomas Cook said on Thursday 21 September. It will also receive €120 million ($169 million / Rs673 crore) in cash.

Condor is Air Berlin''s third major purchase in a year, as the carrier seeks to compete with larger rivals Ryanair and EasyJet. Thomas Cook is the second-largest European travel agency after TUI Travel. The deal fits with its strategy of scaling down operating assets to reduce risk, following its merger with the MyTravel group in June.

The Condor deal is worth almost 50 per cent of Air Berlin''s market value, and the airline is taking a huge gamble, say aviation analysts. They pointed out that acquisitions were easy in the airline business, but creating shareholder value was very tough. Air Berlin shares have declined 21.4 per cent this year.

The Condor purchase adds 35 planes to the 131 operated by Air Berlin. Last month, it won antitrust approval for its €140 million ($197 million, Rs785 crore) purchase of LTU, an unprofitable German charter carrier, which will allow Air Berlin to offer long-haul flights.

Air Berlin will purchase 75.1 per cent of Condor from Thomas Cook in February 2009, the companies said. The travel operator will retain the right to buy the 24.9 per cent of Condor held by Lufthansa, before selling that stake to Air Berlin a year later.