$300 Million Deal Is Carrier's First Move Into US Market
One of American's most popular
low-cost airlines will now carry a bit of German flavor. On
Thursday, Deutsche Lufthansa AG announced it would pay $300 million
for a 19-percent stake in JetBlue Airways Corp. -- the first time
Lufthansa has made a move into the US airline industry.
The deal gives JetBlue a welcome infusion of cash, reports The
Associated Press, and gives Lufthansa control over a potential
takeover down the line.
JetBlue CEO Dave Barger called the deal a "significant
endorsement of JetBlue's franchise from one of the most respected
leaders in global aviation," adding the deal
"reaffirms our belief in JetBlue's disciplined growth plan and will
also improve our balance sheet and give us greater financial
flexibility as we move into 2008."
For economists, the deal is further proof European companies are
looking towards the US for investment... especially as the Euro
continues to strengthen against the US dollar, giving those
entities additional spending power in the US market.
Lufthansa plans to acquire roughly 42 million newly-issued
shares in JetBlue, for $7.27 per share -- a 16 percent premium to
Wednesday's closing price on Wall Street. The deal will also give
Lufthansa a seat on JetBlue's board of directors, and lays the
groundwork for what Lufthansa termed "an operation
cooperation."
If that sounds vaguely ominous, Lufthansa CEO Wolfgang Mayrhuber
hopes his statement Thursday will allay some fears.
"We are very pleased to become an investor in JetBlue,"
Mayrhuber said. "Our investment reflects the confidence we have in
JetBlue's quality, growth potential and management team. This
investment presents Lufthansa with a compelling opportunity to
invest in the U.S. point-to-point carrier market as the industry
continues to evolve. The transaction links two airlines with
international reputations for quality, innovation and a service
culture."
Lufthansa's stake in JetBlue falls under the 25 percent level of
foreign ownership where the Department of Transportation gets
nervous, though as mentioned before it's possible the carrier would
try to add to its stake down the line, and test the DOT's
restrictions.
Calyon Securities analyst Ray Neidl said the deal will created
more options for both carriers, though "it's probably better for
Lufthansa than JetBlue," he added.