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Swiss, Lufthansa tight-lipped on talks

Swiss, Lufthansa tight-lipped on talks

Shares in struggling Swiss International Air Lines slipped back Monday after a climbing fast following an announcement of a possible takeover by Germany's Lufthansa, but both companies stayed tight-lipped about negotiations.
The two carriers made a joint statement Sunday confirming long-standing rumors that they were in talks. They gave few details beyond saying discussions were "constructive" and the cornerstone of any deal would be keeping Switzerland's air connections and keeping the Swiss carrier's brand, also known just as "Swiss."
The Swiss carrier's spokesman Jean-Claude Donzel declined to say more Monday.
"I cannot give you any detail on the timing," he added.
Lufthansa also refused to elaborate.
Swiss CEO Christoph Franz had refused to comment Friday on the Lufthansa speculation, but said Swiss needed to return to profitability before making a deal with another airline.
"That's still valid," Donzel said Monday.
Pressed to explain whether any deal with Lufthansa would be made official only once Swiss has finished restructuring and pushed its figures back into the black, Donzel added, "That's not what I'm saying."
"We have to (restructure) anyway, whether we join an alliance, if we are taken over by somebody else, or if we stay alone," he told the AP.
On Friday, the merger talk had sent Swiss' shares up 19.5 percent in Zurich. They opened up 14.4 percent Monday at 11.90 francs (US$10.35), but dropped back to close at 10.35 francs (US$8.87). That was in line with analysts' forecasts of the sum Lufthansa would likely pay for Swiss.
Any deal would have to be approved by Lufthansa's board of directors, the board of Swiss and Swiss shareholders, the companies said.
Should the plan meet with board approval, Lufthansa said Sunday it would make an offer to buy out smaller investors - who represent around 14 percent of the carrier's stock - based on the average share price in recent weeks.
From a recent average of about 10.20 francs (US$9) per share, that would indicate a total takeover value of 535.3 million francs (US$465.52 million).
Lufthansa shares were up 1.5 percent at 11.35 euros (US$15.25) on the Frankfurt exchange.
Swiss has suffered massive financial problems since it was created out of the defunct Swissair in 2002, blaming its money woes on global economic instability, the SARS crisis in Asia, the Iraq war, high oil prices and competition from low-cost carriers in Europe.
Investment in the airline has been an expensive disaster. Politicians pressured the country's major businesses to pump in cash after the collapse of the cherished Swissair, which caused widespread shock and disbelief in this country.
The government and business put in more than 4 billion francs (US$3.48 billion). Swiss has racked up aggregate losses of 2 billion francs (US$1.74 billion).
The airline posted a net loss of 140 million francs (US$118 million) for 2004, compared with a loss of 687 million francs in 2003. Swiss has announced a string of cost-cutting programs, slashing jobs, aircraft and destinations. It launched its latest round of cuts in January.
Banking giants Credit Suisse and UBS, as well as the canton (state) of Zurich each hold 10 percent of the airline's shares. Switzerland's government, the top shareholder, holds 20 percent.
They and Swiss' other major corporate and cantonal (state) shareholders - who together represent 86 percent of stock - are all prohibited from selling their holdings because of a lockup agreement.
UBS spokeswoman Eveline Mueller said the bank would not comment until it had examined Lufthansa's conditions.