Executive Travel : Lufthansa, SAS Expected to Form Strategic Alliance

Lufthansa of Germany and Scandinavian Airlines System are expected to announce a strategic alliance today that would make them the largest network in Europe and a powerful contender for lucrative long-haul traffic.

SAS, half-owned by the governments of Denmark, Norway and Sweden and half by private investors, said its president, Jan Stenberg, and Lufthansa Chairman Jurgen Weber would hold a joint news conference in Copenhagen on the progress of cooperation talks started several months ago.

Neither carrier would say in advance what the talks have achieved, but industry analysts expect them to announce a partnership in which they share capacity, marketing, maintenance facilities and other resources but stop short of a merger.

With Lufthansa’s existing partnership with Finland’s Finnair expanded by the SAS link, the new alliance will become the Continent’s biggest. But analysts say the real target is intercontinental traffic. “The market share that really they’re going for is the long-haul market out of Scandinavia,” S.G. Warburg airline analyst Andrew Barker said.

Kevin O’Toole, business editor of the journal Flight International, said the deal will expand SAS long-haul capacity while realizing Lufthansa’s declared aim of European expansion, begun through partnerships with Austria’s Lauda Air and Luxembourg’s Luxair.

“SAS has a very strong European network but is not that large in intercontinental flights,” he said. “The Lufthansa policy is very clear. . . . They said they’re going to expand around Germany so they took a stake in Lauda; there’s a deal with Luxair, they’ve a deal with Finnair, they’re now getting a deal with SAS.”

O’Toole and Barker said British Airways and Dutch carrier KLM are the airlines most likely to lose market share to the new alliance.

Lufthansa is about twice the size of its Scandinavian counterpart, with 250 planes flying to 222 destinations, compared to SAS’ 141 aircraft serving 102 cities.