TUI to form budget carrier with Lufthansa

TUI and airline Lufthansa are working on creating a new low-cost carrier.  The partners have signed a letter of intent for a merger of TUI Travel, Hapag-Lloyd with Lufthansa units Germanwings and Eurowings.Albrecht Knauf, who is a partner with Lufthansa in Germanwings and Eurowings, is to hold a significant stake in the new business.

TUI and Lufthansa would each own 40 percent, with Knauf holding the rest. If the deal goes ahead, the combined carrier would transport about 30 million passengers a year.

Full statement

TUI Travel upgrades synergy potential

Plans to merge Germanwings, Eurowings and TUIfly

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London/Hanover, January 29, 2008

TUI Travel PLC, a TUI AG group company, today publishes the results of the 100-day-review by CEO Peter Long in London and provides an update on details of its further strategy. According to this update, excellent progress has been achieved on the integration of the business of First Choice Holidays PLC and TUI’s tourism division under the newly formed TUI Travel. As a result, TUI Travel has upgraded the expected synergies from an initial 100 million pound sterling to now 150 million pound sterling per annum. The synergies are expected to be fully effective by the end of the 2010 financial year. The additional synergy benefit will be realised in the UK and in continental Europe as well as a number of central functions. It is now expected that the restructuring costs associated with the delivery of the synergies will amount to 180 million pound sterling. The identified synergies and further underlying margin opportunity in the Mainstream Holidays as well as in the Specialist sector will facilitate a significant increase in the operating margin going forward.

In addition, TUI Travel PLC has today signed a Memorandum of Understanding with Deutsche Lufthansa AG and Albrecht Knauf Industriebeteiligung GmbH, allowing the parties to proceed with plans to merge their subsidiaries Hapag-Lloyd Fluggesellschaft GmbH, Hapag-Lloyd Express GmbH, Germanwings GmbH and Eurowings Luftverkehrs AG under a joint and independent holding company. The prerequisites for the conclusion of legally binding agreements will be a due diligence process and negotiations of the specific details. The merger will require approval by the relevant bodies of the companies involved and by the anti-trust authorities.
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