Lufthansa takes strategic equity share in Brussels Airlines

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Acquisition of 45 per cent for 65 million euros / Acquisition of remaining 55 per cent intended

Brussels Airlines is embarking on a new future with Lufthansa: Lufthansa Chairman Wolfgang Mayrhuber and SN Airholding Chairman Etienne Davignon have signed an agreement, which initially envisages a strategic stake in SN Airholding SA/NV and, in a second step, the full integration of the Belgian carrier in the Lufthansa Group. The agreement still requires the approval of the regulatory authorities and the Lufthansa Supervisory Board as well as the Board of Directors and shareholders of SN Airholding SA/NV.

In a first step, Lufthansa is taking out a stake of 45 per cent in SN Airholding SA/NV for 65 million euros via a capital increase. After securing the air traffic rights of Brussels Airlines, Lufthansa will then have an option of acquiring the remaining 55 per cent from 2011. It would then wholly-own the Belgian carrier.

The price for taking up the remaining 55 per cent depends on performance-related factors so that the cost for complete acquisition of Brussels Airlines could amount to a maximum of 250 million euros.

The jointly drafted integration model is shaped along the lines of the successful cooperation between Lufthansa and SWISS: It envisages that Brussels Airlines will operate as a largely independent company in the Lufthansa Group subject to its uniformly formulated targets, strategic guidelines and financial resources. It also stipulates that, after exercise of the option, Brussels Airlines should retain its headquarters and management in Brussels. It will continue operating and developing its strengths under its familiar brand with its own aircraft and crew, and expand its local advantages in the Belgian market. That includes a demand-driven route network including intercontinental connections. The Lufthansa hubs in Frankfurt, Munich and Zurich will complement the overall services offered to customers in accordance with specific market potential, customer's preferences and cost structures. The integration is designed to enable Brussels Airlines to operate in a demanding market environment, to develop further, attain its growth targets and raise its profitability, and thereby offer customers and staff better long-term perspectives.

Lufthansa Chairman Wolfgang Mayrhuber emphasised that the bundling of strengths was necessary and sensible in order to strengthen competitiveness and overall cost efficiency. “With Brussels Airlines and Lufthansa, two airlines whose services ideally complement each other and which enjoy an excellent reputation well beyond their home markets, are joining forces. Together we can offer more destinations, optimised connections, mutual use of each other’s frequent flyer programmes and extended lounge access, which will enhance the attractiveness of the portfolios of both airlines. Belgium and Germany as well as the Star Alliance member-airlines will profit from the merger. The fusion will not least contribute to strengthening European aviation. That is important, since only a strong and economically successful European airline structure can provide the quality global connections required by European business and industry, and offer employees long-term prospects“.

Etienne Davignon welcomed the successful outcome of the negotiations with Lufthansa: ”A joint future with Lufthansa provides us with the best chance of operating successfully against the competition. Lufthansa’s multi-hub and multi-brand strategies constitute the best prerequisites for the stability and future growth of Brussels Airlines“.

With the integration of Brussels Airlines, Lufthansa will further strengthen its position as a leading international network carrier. Through improved access to an attractive and important European market with huge economic potential and a high volume of premium traffic, Lufthansa will also gain in competitiveness. Brussels Airlines and its strong Africa network will profit from additional customers for the connections that can be laid on from the Brussels hub.

In their joint future, Brussels Airlines and Lufthansa can profit from substantial synergies in respect of earnings and costs, which are likely to rise gradually to a mid-double-digit million euro figure annually within three years of regulatory approval.

Lufthansa und Brussels Airlines – the figures

The airlines in the Lufthansa Group carried 63 million passengers to 208 destinations last year. A total of 5.8 million passengers flew with Brussels Airlines and its partners. Brussels Airlines operates in a network encompassing 62 destinations. The merger will add a further 12 destinations to the Lufthansa network, the number on offer to Brussels Airlines customers will rise by 133. Lufthansa employs around 105,000 employees and operates a fleet of 513 aircraft (consolidated fleet). Brussels Airlines operates a fleet of 49 aircraft with a workforce of about 3,000 staff.

Transaction:

1. Acquisition of 45 per-cent in SN Airholding SA/NV after regulatory approval
2. Development of joint portfolio
3. Initiation of admission procedure to membership of Star Alliance
4. Adaptation and safeguarding of air traffic rights
5. Complete takeover of SN Airholding SA/NV and Brussels Airlines after securing traffic rights on the basis of a call option, which can be exercised from 2011

For photos please visit our website: http://media.lufthansa.com

Deutsche Lufthansa AG / Brussels Airlines press release 15 September 2008

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Lufthansa and Brussels Airlines : positive for Brussels Airlines and Brussels Airport future

Brussels Airport, 15 September 2008. The financial participation of Lufthansa in Brussels Airlines that was announced earlier this afternoon, is welcomed by Brussels Airport.

"The introduction of the Belgian carrier into this solid European aviation group brings the prospect of a healthy future for Brussels Airlines, our home base carrier and largest user of our airport," says Wilfried Van Assche, CEO at Brussels Airport.

The success of an airport goes hand in hand with the future of its main airline users. Lufthansa is a world class carrier, and it is also thoroughly familiar with the complex specifics of aviation in Europe.

Brussels Airport applauds the news that Brussels Airlines will continue to operate as an independent airline. Brussels Airlines is tied to Brussels the Capital of Europe, and conscequently also to Brussels Airport.

Van Assche refers to the similar case of the Swiss home base carrier. Since its integration in the Lufthansa group in 2005, Swiss kept its own name and individuality. Today, together with and next to Lufthansa, Swiss is a respected network carrier at the top of European aviation. For their home airport Zurich too, this integration has proved to be an important milestone.

"Brussels Airport holds many trump cards to become an important future hub for the Lufthansa group. Already today, Brussels Airport is a main hub to central Africa and Brussels Airport currently invests in improving its facilities for its passengers to and from this continent."

The introduction of Brussels Airlines too, is welcomed by Brussels Airport. "Until now Brussels Airport was not really on the charts of any big alliance. This is about to change now. Star Alliance is by far the largest worldwide alliance of airlines, including main long haul airlines like United, US Airways, Singapore Airlines, Thai Airways, ANA and others. Some of these already operate at Brussels Airport, others do not. This opens new perspectives to the airport and its future passengers," Van Assche concludes.


Brussels Airport News, 16/09/2008

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Lufthansa Supervisory Board approves equity investment in SN Airholding SA/NV

The Supervisory Board of the Lufthansa Group has approved an agreement on a strategic investment in SN Airholding SA/NV, the parent company of Brussels Airlines. According to the agreement, Lufthansa will acquire a 45 per cent stake in SN Airholding SA/NV for a price of 65 million Euros in the first phase. As of 2011, and following the securing of the air traffic rights of Brussels Airlines, Lufthansa will also be able to exercise an option to acquire the remaining 55 per cent in the second phase. Furthermore, the parties have agreed that Brussels Airlines shall be fully integrated into the Lufthansa Group as soon as Lufthansa has acquired the full 100 per cent stake.

Lufthansa CEO and Chairman, Wolfgang Mayrhuber, and SN Airholding Chairman, Etienne Davignon, signed the agreement in mid-September. The agreement has yet to be approved by the competition authorities and the Board of Directors and shareholders of SN Airholding SA/NV.

Deutsche Lufthansa AG Corporate Communications press release 24.09.08

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Press Release SN Airholding

Brussels, 25 September 2008

The Board of SN Airholding has unanimously approved today an agreement on a strategic investment of the Lufthansa Group in SN Airholding.

With this agreement Lufthansa will acquire a 45 % stake in SN Airholding, the parent of Brussels Airlines, via a capital increase of 65 million euro. Lufthansa also has option to buy the remaining 55 % from 2011.

The agreement, which was already signed last week by SN Airholding Chairman Viscount Etienne Davignon and Lufthansa CEO and Chairman Wolfgang Mayrhuber, has yet to be approved by the shareholders of SN Airholding and by the regulatory authorities.

Brussels Airlines Corporate Communications 25 September 2008