(Reuters) -Lufthansa has agreed to acquire a 10% stake in IPO-bound Latvian airline airBaltic, the German airline said on Wednesday, its latest move to expand its European presence and gain access to more planes to relieve its supply constraints.
Speculation has mounted over the next candidates for consolidation in Europe’s fragmented airline scene. Portugal’s TAP is the next national flag carrier expected to sell off a stake in an effort to revamp its business.
The German flag carrier, one of three major candidates in Europe for takeovers of smaller national carriers, recently bought a 41% stake in Italian state-owned airline ITA.
Reuters reported on Tuesday that Lufthansa is in separate talks to acquire a minority stake in Spain’s Air Europa.
A source with knowledge of the deal said a larger stake in airBaltic is not currently in Lufthansa’s interest. Stakes below 20% allow the companies taking over smaller airlines to avoid greater regulatory scrutiny and provide a foundation to expand ownership in the future.
In September last year, Reuters had reported that Lufthansa was considering taking a stake in airBaltic ahead of its planned IPO in early 2026.
The stake will be issued in the form of convertible shares currently at a subscription price of 14 million euros ($14.56 million), but the stake size may be subject to change depending on the pricing of airBaltic’s IPO, Lufthansa said.
Lufthansa will also receive a seat in airBaltic’s supervisory board, the German firm said.
AirBaltic said in a separate statement that the deal would provide it with additional funding to support its growth and expansion plans. In the past, it had said it would be keen to eventually become part of a larger group, like Lufthansa.
The transaction is planned to close during the second quarter of 2025, subject to antitrust review.
European airlines have struggled with supply chain delays, labour disruption, surging prices and limits to airspace in 2024, with many reporting weaker-than-expected financial results, putting pressure on sector valuations.
($1 = 0.9615 euros)
(Reporting by Joanna Plucinska in London, Rishabh Jaiswal and Kanjyik Ghosh in Bengaluru; Editing by Maju Samuel and David Gregorio)
