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By Victoria Bryan
BERLIN, Sept 29 (Reuters) - Shares in Lufthansa fell to a four-year low on Thursday on concerns its plans toboost its low-cost Eurowings brand by leasing Air Berlin planes would neither lower costs nor head off largerrivals.
Lufthansa has said it wants to turn Eurowings into Europe'sthird low-cost airline behind Ryanair and easyJet. The lease deal announced on Wednesday along withLufthansa's decision to buy the rest of Brussels Airlines willprovide planes for that expansion.
Analysts said, however, that a deal to lease Air Berlinplanes and crews for short-haul routes next summer would likelyincrease costs and seemed to be more of a defensive move to stopRyanair and easyJet gaining a foothold in Germany at the expenseof Air Berlin, which has been losing money for years.
"It's far from clear that this expansion will help Lufthansato secure greater profitability," independent aviationconsultant John Strickland said. "Ryanair in particular has anorder book exceeding 300 aircraft and Lufthansa is likely tostill feel increasing competitive heat as a result of this."
Lufthansa shares fell to a four-year low of 9.725 euros onThursday and were down 2.2 percent at 0917 GMT. Shares in otherEuropean airlines also slipped on Thursday after OPEC agreed tocurb crude oil output.
The German airline, which has been battling with its pilotunions about cost cutting plans at Lufthansa, is aiming to putEurowings on a par with easyJet when it comes to costs.
The so-called wet lease deal for 40 planes and crew doesthrow a financial lifeline to Air Berlin, however, which said itexpected payments over the six-year deal to exceed 1.2 billioneuros ($1.4 billion).
Shares in the loss-making airline, which is 29 percent ownedby gulf carrier Etihad Airways, were worth almost 20 eurosapiece back in 2007 but now trade for under 1 euro. They climbed1.2 percent on Thursday, outperforming other airlines.
"We struggle to see how contract terms could simultaneouslydeliver an acceptable positive return for Air Berlin while alsodelivering a suitably competitive cost base for Eurowings,"Liberum analyst Gerald Khoo wrote in a note.
Lufthansa said on Wednesday the deal would be agreed at"competitive market rates" while Air Berlin's CEO Stefan Pichlersaid it would only strike such a deal if it was attractive.
Eurowings CEO Karl Ulrich Garnadt is due to hold a pressconference at 1000 GMT on Thursday.
RBC analyst Damian Brewer said he was "perplexed" by the wetlease deal, saying Lufthansa could instead lease planes on theopen market and crew them with new staff at market rates.
Michael Gierse, fund manager at Lufthansa shareholder UnionInvestment, said the lease deal would put Eurowings in keymarkets to help block easyJet and other rivals.
"But it will only delay them and not prevent themcompletely," he said.
($1 = 0.8912 euros) (Editing by David Clarke)
