Lufthansa announced (29-Mar-2012) that Lufthansa Malta Blues LP successfully priced the issue of EUR234.4 million notes due 2017 exchangeable into shares of common stock of JetBlue Airways Corporation at the option of the noteholders and guaranteed by Lufthansa AG. Lufthansa offered and sold the notes to qualified institutional buyers in an institutional private placement. Lufthansa, which expects to settle the offering on or around 05-Apr-2012, set the terms for the five-year notes maturing 05-Apr-2017 at a coupon of 0.75% p/a, payable annually and an initial exchange price of EUR5.02 per share of JetBlue common stock, representing an exchange premium of 37.5% based on the volume weighted average trading price between market open and pricing on 29-Mar-2012. JetBlue will not receive any of the proceeds from the sale of the notes or any financial benefit from the exchange of JetBlue common stock. The proceeds from the offering are to be used for general corporate purposes. Lufthansa, meanwhile, stated it has no intention of ending its investment in JetBlue Airways, although the option remains a possibility depending on the capital needs of the airline (Reuters, 29-Mar-2012). Lufthansa CEO Christoph Franz said Lufthansa's plans to offer the convertible notes that can be exchanged for up to 46.7 million shares of JetBlue common stock is an attractive way "given current market conditions" to get financing. "It's not the intention of Lufthansa to sell stock and terminate our investment in JetBlue," he said noting, "We did not sell one single share." Lufthansa owns a 15.7% stake in the carrier. [more - original PR - Lufthansa] [more - original PR - JetBlue SEC Filing] [more - original PR - II]
Lufthansa Malta Blues LP offering notes exchangeable into JetBlue shares and guaranteed by Lufthansa
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Lufthansa and Etihad: equity tie up could further align mutual strategy, but marriage unlikely
Greater cooperation between Lufthansa and Etihad reflects their local and global challenges growing in quantity and complexity. Contact between the two has led to speculation that the partnership could radically expand to include an equity tie up, with rumoured merger talks.
Their initial Dec-2016 codeshare announcement was, in practical terms, small but showed the possibility, as they stated, to expand cooperation. However, it would be a leap to go from their handful of codeshares to a 17-Jan-2017 article from Italian daily newspaper Il Messaggero that Etihad could invest in Lufthansa on the way to a possible merger between the two. A subsequent denial in a Reuters story that "A financial stake is out of the question at the moment", does little to dispel the rumour. Were it not for the last three words of that statement the rumour would lack credibility.
There is certainly logic for a deeper partnership - and the two have danced this waltz before. Equity involvement from airlines can cement partnerships, add to board influence and partially allow one side to gain financially from any matter it feels it is compromising away. Nevertheless, there are obstacles to a full blown merger, and even to Etihad's taking a 30% to 40% stake. A marriage between the new bedfellows does not seem an immediate prospect. Nonetheless the logic is there for a move; and the mere fact of a potential move is sufficient to rock the equilibrium.
Eurowings: new Munich routes outsourced to airberlin. Frankfurt hub may be next for Lufthansa's LCC
When Lufthansa began to transfer point-to-point short haul routes to its LCC Germanwings in 2013 it specifically excluded routes to/from its two main hubs at Munich and Frankfurt. Although its two main hubs have been less penetrated by LCCs than many other major European airports, this is changing. Moreover, competitor LCCs are growing rapidly across Germany and in other Lufthansa Group home markets. Even Air France-KLM established a Munich base for its LCC Transavia in summer 2016 (but this is under review). More ominously, Ryanair is to enter Frankfurt in summer 2017.
Lufthansa first revealed in summer 2016 that it was considering opening a Munich base for its LCC operations, now grouped under the Eurowings brand. On 21-Dec-2016 it announced plans to base four A320 family aircraft at Munich for 32 Eurowings routes from summer 2017.
Perhaps it was always inevitable that Eurowings would eventually extend to selected routes from Frankfurt and Munich, but agreements with pilots were understood to have limited the group's flexibility. Confirmation that the operation of Eurowings routes at Munich will be outsourced to airberlin under wet lease appears to have loosened this restriction. Eurowings routes from Frankfurt are also being considered.