Lufthansa has taken off on a new European course with the acquisition of Swiss. The takeover, which was approved on March 23 as expected, opens up the lucrative Swiss market for the German group, gives it another hub in Central Europe and strengthens its competitive position versus Air France-KLM and British Airways.

Lufthansa CEO Wolfgang Mayrhuber stressed at last week’s annual news conference that it was "quite realistic” that Swiss could complete its financial restructuring by breaking even in 2006 and moving into profit in 2007.

Star Alliance members, including neighbour Austrian Airlines in Vienna, would also benefit with new routes and market potential, he emphasised. But the future of the Swiss carrier’s loss-making regional business remains unclear.

Under a complex transaction structure, Lufthansa will pay about EUR 45 million this spring for the 15% stake in Swiss held by private investors, will build up a stake of up 49% and finally gain 100% control once air traffic rights have been re-negotiated.

The large Swiss shareholders will be paid a maximum of EUR 250 million in 2008 if Lufthansa shares out-perform a basket of competitors’ shares in the meantime. Swiss will become a profit centre operating as a separate airline with its own fleet, crew and management.

The two airlines will start to integrate their networks from winter 2005/06 and aim to mostly complete this in summer 2006. Zurich will become a Lufthansa hub alongside Frankfurt and Munich.