Lufthansa Buys into JetBlue Airways

A JetBlue Airways Embraer 1990 is photographed moments before landing. Lufthansa claims its agreement to buy a 19 percent stake in JetBlue represents the first significant investment by a European air carrier in a U.S. point-to-point air carrier.' Strictly, this might be correct, but the Virgin Group's minority investment in Virgin America also has created airlines with a degree of common ownership on both sides of the Atlantic. Credit: Derek Rust

German airline Lufthansa is becoming a minority shareholder in JetBlue Airways.

The two carriers announced an agreement today for Frankfurt-based Lufthansa to buy a 19 percent holding in JetBlue, a low-fare airline based at New York JFK. The deal represents "the first significant investment by a European air carrier in a U.S. point-to-point air carrier," the airlines said in a joint statement.

JetBlue will sell Lufthansa approximately 42 million newly issued common shares in a private placement, at a price of $7.27 per share. This price represents a premium of 16 percent on yesterday's closing price of $6.25 for JetBlue common stock. Lufthansa will pay approximately $300 million in total for its JetBlue shareholding.

Lufthansa will be allowed to appoint one member to JetBlue's board of directors when the deal closes, an event that is expected to occur in the first quarter of 2008. The Lufthansa nominee will be up for election at JetBlue's annual meeting in 2008.

"Our investment reflects the confidence we have in JetBlue's quality, growth potential and management team," said Wolfgang Mayrhuber, Lufthansa Group chairman and CEO. "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."

Dave Barger, JetBlue's CEO, commented: "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."

The two airlines said they looked forward "to exploring potential opportunities for further cooperation for the benefit of their customers," but noted that "no specific areas of potential cooperation have been agreed upon" as yet.

Approval from JetBlue's shareholders is not required for the sale of shares to Lufthansa to take place, the two airlines said.

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