Lufthansa, Air China Said to Finalize Venture This Month (1)

(Bloomberg) -- Deutsche Lufthansa AG and Air China Ltd. plan to finalize a joint venture this month, sealing a deal to share revenue and coordinate routes after more than two years of negotiations, people familiar with the plan said.

Lufthansa Chief Executive Officer Carsten Spohr will travel to Beijing to attend a signing ceremony scheduled for Sept. 20, said the people, who asked not to be identified prior to an announcement. The joint venture is the closest two carriers can get under legal restrictions limiting foreign control of airlines.

Talks to set up the Chinese flag carrier’s first venture with a European airline have been complex as the two sides wrangled over financial and organizational structures. After starting discussions in 2014 on expanding commercial ties, the companies failed to seal an accord in 2015 as planned.

Lufthansa declined to comment on the timing of an agreement. Beijing-based Air China also declined to comment.

Global Accords

For Lufthansa, the Air China deal completes a network of revenue-sharing agreements with major markets around the globe as the German carrier seeks to fend off threats from the likes of Emirates and Qatar Airways. Lufthansa last year struck a similar deal with Singapore Airlines Ltd., adding to its network of partners that include United Airlines, Air Canada and Japan’s ANA Holdings Inc.

Air France-KLM Group already has joint ventures with Skyteam alliance partners China Southern Airlines Co. -- the biggest Asian airline by passengers -- and China Eastern Airlines Corp. that involve timetable harmonization and cost and revenue sharing on some routes.

The Air China agreement will mean close to half of Lufthansa’s long-haul
capacity will be covered by commercial joint ventures, more than any other European network carrier, according to CAPA Centre for Aviation in London.

Lufthansa and Air China, which are partners in the Star Alliance, have been operating passenger flights under code-share agreements since 2000. In 1989, the pair jointly established maintenance company Ameco Beijing, which employs more than 11,000 people.

Shares of Lufthansa rose as much as 1.2 percent and were trading 0.8 percent higher at 10.53 euros as of 10:12 a.m. in Frankfurt.

(Updates with Air France-KLM/China ties in sixth paragraph, Lufthansa shares in last.)

--With assistance from Andrea Rothman To contact the reporters on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net, Daniela Wei in Hong Kong at jwei74@bloomberg.net. To contact the editors responsible for this story: Chris Reiter at creiter2@bloomberg.net, Christopher Jasper

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