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Lufthansa to Buy Stake in JetBlue

By MATT MOORE,

Posted: 2007-12-13 16:19:40

FRANKFURT, Germany (Dec. 13) - German biggest airline, Deutsche Lufthansa AG, said Thursday it is paying $300 million for a 19 percent stake in JetBlue Airways Corp. in its first foray into the U.S. airline market.

Stephen Chernin, Getty Images

JetBlue was founded in 1999 as a low-fare airline. The company's reputation and financial strength were hit last February when a severe winter storm forced it to cancel more than a thousand flights.

The cash would provide New York-based JetBlue a welcome infusion for a carrier has been struggling.

The move comes as the euro has risen significantly, putting more shine on U.S. companies for European buyers.

JetBlue CEO Dave Barger called the deal a "significant endorsement of JetBlue's franchise from one of the most respected leaders in global aviation."

He said that the agreement "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."

In a brief statement, Lufthansa said it would acquire about 42 million newly-issued shares from the JetBlue for $7.27 per share, a 16 percent premium to Wednesday's closing price.

The terms of the deal also call for a Lufthansa nominee to be appointed to JetBlue's board of directors once the deal is concluded. JetBlue said that the deal does not require approval from its shareholders.

The deal also provides that the carriers would seek "an operation cooperation."

"We are very pleased to become an investor in JetBlue," said Lufthansa Chief Executive Wolfgang Mayrhuber. "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."

Selling a stake to Lufthansa would benefit both airlines by bringing each new sources of traffic, said Ray Neidl, an analyst at Calyon Securities in New York.

"It's probably better for Lufthansa than JetBlue," Neidl said.

But it would also put Lufthansa in the driver's seat for any potential longer-term takeover of JetBlue. Lufthansa is barred from such a takeover under current laws restricting foreign ownership of domestic airlines to 25 percent, but there have been attempts over the years to overturn that law, Neidl said.

JetBlue shares rose 83 cents, or 13.3 percent, to $7.09 in afternoon trading. Shares of Lufthansa fell more than 2 percent to close at 18.36 euros ($26.96) before the deal was announced.

AP Business Writer John Wilen in New York contributed to this report.

Copyright 2008 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. All active hyperlinks have been inserted by AOL.

2007-12-13 14:52:15

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13 comments

LLUVNJ 11:58:10 PM Dec 13 2007

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NOOOOOOOOOOOOOOOO!
Well, okay if they must.
Will this change the snack menu? If so, I'd like to suggest little Swedish meatballs.
One can only hope.

GBloodT 10:03:00 PM Dec 13 2007

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yeah ok Germany was really smart in world war 2 forcing Jewish scientists to the United States picking their allies yea Germany has been very smart o yeah that reminds me who created the first nuclear bomb? Also during world war 2 the Germans let the Jappanese attack us forcing US into the war an we fought both fronts the alantic and also the pacific an look who came out on top.

Sensib1 09:24:55 PM Dec 13 2007

Report This! Once again the USA must turn to German Supermen in order to survive.
We will dominate all inferior peoples within the next decade, only this time with our economic might and superior intellect. People should know when they are conquered.

Sensib1 09:24:55 PM Dec 13 2007

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Once again the USA must turn to German Supermen in order to survive.
We will dominate all inferior peoples within the next decade, only this time with our economic might and superior intellect. People should know when they are conquered.

Jamcarr3 09:23:09 PM Dec 13 2007

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the germans need to take it all and then we will start getting better flights and service at fair price they seem to know how to run companies i understand about chrysler but a lot of the fault lies with crooked u.s. management and greed.

Linmarco 09:21:00 PM Dec 13 2007

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That's the free market working. Don't be surprised if one day you wake up and
the whole country is foreign owned. People of means won't be affected. The
ones they screwed will.

Telesia1 08:31:34 PM Dec 13 2007

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<<<<<< SunsetHighway WROTE:
Gee, maybe they can do to Jet Blue what Mercedes did to Chrysler. Foreign investment should be banned in this country. >>>>>>>

That would be protectionism. But there's a time and place for EVERYTHING under God's heaven (turn, turn, turn)... and right now might be the time for protectionism, until America finds its way back on course - and lifts itself up back to where it once was... the manufacturing giant of the world. But oops... that might mean a bit less profit for America's extra-greedy elitists. Shucks...

Telesia1 08:28:18 PM Dec 13 2007

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<<<< KampfgestFj WROTE:
Global economy or American decline? >>>>>

the latter of the two would be the correct choice.

America can't afford to be part of the "global" economy. Not when China and other countries play dirty pool via manipulation of currencies and/or agreements. But then, no one in this country "forces" American consumers to open their wallets to el-cheapo imports. It would seem that Americans only loyalty is to their own "almighty dollar" And THAT will further the demise of this once-great nation. By 2050 I expect that our national language will be Mandarin and/or Cantonese.

Telesia1 08:24:40 PM Dec 13 2007

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<<<< JINX1105 childishly WROTE:
I love how online posters lie about where they live (like Ginuiine), what they do/did for a living, etc., trying to pass themselves off as some sort of expert on the topic discussed. They don't realize that their typing (read: horrific grammatical errors, all caps, poor spelling, etc.) gives their true very young teenage ages away. >>>>

I love how trivial, anal-retentive people like YOU feel the need to elevate themselves by using another's typos. I work with doctors, lawyers, and other college grads who can barely construct a sentence, yet ALL are quite successful. Even my own sister, a retired engineer from Intel... she composes some of the worst e-mails I've ever read - but she's quite successul in her given profession.

You though, should be ashamed of your trivial, anal-rententive semantics. tsk tsk tsk... you're like a child stomping their feet.

SunsetHighway 08:00:44 PM Dec 13 2007

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Gee, maybe they can do to Jet Blue what Mercedes did to Chrysler. Foreign investment should be banned in this country.

JINX1105 06:40:00 PM Dec 13 2007

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I love how online posters lie about where they live (like Ginuiine), what they do/did for a living, etc., trying to pass themselves off as some sort of expert on the topic discussed. They don't realize that their typing (read: horrific grammatical errors, all caps, poor spelling, etc.) gives their true very young teenage ages away.

Ginuiine gave his extreme young age and his business ignorance away when he actually thought 300 million is a buy out. A minimum buy out for ANY US airline would be 5.5 billion. I'll let Ginuiine figure out what's involved in that amount and how a buy out occurs.

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13 comments