Discount airline JetBlue sells 19 per cent stake to Lufthansa for $300 million

Struggling discount carrier JetBlue has sold a 19 per cent stake to German airline Lufthansa for $300 million on Thursday 13 December. This is the first major investment by a foreign airline in an American rival since British Airways took a stake in American Airlines in the early 1990s.

The transaction is also the latest example of how foreign entities can take advantage of a weak dollar to invest in frontline American companies. JetBlue has $433 million in current debt obligations, has substantially cut back on its growth plans and sold assets, including old planes.

Lufthansa's investment is strictly financial and does not include any strategic partnership, at least for now. But industry watchers say the deal could lead to further cooperation, giving Lufthansa an important foothold in the US. Lufthansa, Europe's second-largest airline after Air France-KLM, will buy 42 million newly issued JetBlue shares at $7.27 each. It will also get a seat on the discount airline's board.

US federal law limits the foreign ownership of any airline to a 25-per-cent voting stake and/or 49 per cent of equity. Both companies say the deal does not specify any areas of cooperation.

But a major potential benefit for Lufthansa is JetBlue's huge presence at New York's Kennedy International Airport, one of the nation's biggest hubs for foreign flights. Officials are considering reducing the number of takeoffs and landings to reduce overcrowding and delays, and this will make each existing slot that much more valuable.

JetBlue expects to complete a new terminal at the airport next year, and has an option to build a second. The terminal opening in 2008 is being built solely for domestic flights on single-aisle jets and it has no customs office. But JetBlue has the clearance to build a second terminal with international capacity.