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UPDATE 1-Lufthansa in talks on SAS and Brussels Airlines to spread Eurowings -sources

Wed, 13th Apr 2016 13:35

* Lufthansa in talks with owners of SAS - sources

* Partnership or Lufthansa stake possibilities - sources

* Board to discuss Brussels Airlines on April 27 - sources (Recasts with talks over SAS, adds comments)

By Peter Maushagen

FRANKFURT, April 13 (Reuters) - Lufthansa is intalks with the owners of Scandinavian carrier SAS andBrussels Airlines as it seeks to expand its network and itsEurowings low-cost platform, people close to the German airlinesaid.

Two sources said on Wednesday that Lufthansa had been intalks with the owners of SAS since the autumn.

The talks could result in Lufthansa taking a stake in SAS -half owned by Denmark, Norway and Sweden - a cooperation, orsome other kind of partnership, they said.

"SAS could be docked onto budget platform Eurowings," one ofthe people said.

People familiar with the industry said that a full takeoverof SAS by Lufthansa is seen as unlikely, while taking a minoritystake would potentially come with a board seat and directinfluence on the Scandinavian peer's strategy.

"Lufthansa wants to build Eurowings, but it does not want totake on any restructuring risk," one of those people said.

Lufthansa launched Eurowings last year, in a fresh attemptto crack the low-cost market and compete with the likes ofRyanair and easyJet. It has said it aimed to useit to bundle various subsidiaries and brands.

SAS, which has repeatedly been the subject of takeoverspeculation, expects to swing to a full-year profit this yearand has said it wanted to play an active role in consolidationin Europe.

One of the sources close to the company said it was "as goodas certain" that Lufthansa's supervisory board would alsodiscuss at a meeting on April 27 buying the 55 percent ofBrussels Airlines which it does not yet own.

That news was also reported earlier on Wednesday by Germandaily Sueddeutsche Zeitung.

Lufthansa, which is due to hold its annual general meetingon April 28, said it has been a partner with SAS since airlinecooperation group Star Alliance was founded and as a result isin continuous talks with the Scandinavian carrier. "Anythingelse is speculation," a Lufthansa spokesman said.

SAS declined comment.

Brussels Airlines is attractive for Lufthansa because of thebusiness traffic which flows through its hub in the Belgiancapital, where many European Union institutions are based.

However, bomb attacks on Brussels' airport and subwaynetwork last month which forced the airport to close cost theairline around 5 million euros ($5.7 million) a day. The airportpartially reopened on April 3.

Lufthansa bought 45 percent of Brussels Airlines for 65million euros but retained an option to acquire the rest by2018, with the total price for the takeover coming to as much as250 million euros, depending on the carrier's performance.

Lufthansa Chief Financial Officer Simone Menne said lastmonth that the German airline would like to "come to aconclusion" on Brussels Airlines this year.

"We expect an important step in the second quarter," shesaid at the time, adding that Lufthansa was in talks withcolleagues in Brussels.

($1 = 0.8800 euros) (Additional reporting by Arno Schuetze, Victoria Bryan and MiaShanley; Writing by Maria Sheahan; Editing by Jonathan Gould andAlexander Smith)

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