Lufthansa is set become Europe’s biggest airline, overtaking Air France-KLM, as it takes over a string of struggling rivals. It believes the acquisitions will leave it ideally placed to be a leading force in the eventual consolidation of the global airline industry, when present regulatory constraints are removed.

Air France pioneered the wave of aviation restructuring in Europe with its ­acquisition of KLM of the Netherlands in 2004, the first takeover of a European flag carrier, but it is Lufthansa that is now setting the pace, and its appetite is far from satisfied.

SAS Scandinavian Airlines could be a future target and Stephan Gemkow, Lufthansa chief financial officer, told the Financial Times the German group was also keeping a close eye on British Airways’ protracted merger negotiations with Spain’s Iberia airline.

Should the talks fail, Lufthansa could well revive its interest in the Spanish carrier.

As the world tumbled into recession last autumn, Lufthansa made good on its prediction that the burden of high oil prices, which peaked last summer, would drive many carriers into the arms of fitter rivals.

The German group, which had already gradually taken over Swiss between 2005 and 2007, announced last September that it was buying 45 per cent of Belgium’s Brussels Airlines. Last October, it said it was negotiating to take control of the UK’s BMI British Midland, and in November it announced the planned rescue takeover of Austrian Airlines.

In parallel, it held talks with troubled Alitalia. But it seemed happy to let rival Air France-KLM agree a participation in the Italian flag carrier. It started, instead, a new venture, Lufthansa Italia, operating out of Milan’s Malpensa airport, which in recent years has been largely deserted by Alitalia.

“We want to be a major player in Europe, which will automatically make us one of the most attractive partners in the region for airlines outside Europe,” said Mr Gemkow.

While the Lufthansa finance chief said the chance of intercontinental deals taking place was still a few years off, European consolidation was on track, even if the recession would probably slow the pace in coming months.

“Since the recession has got into its full swing, the consolidation situation has changed,” he said, noting that governments had become more prone to bail out troubled companies – as occurred with Alitalia and had also happened with several Asian carriers – and potential buyers had become more risk averse.

He admitted the recession had made Lufthansa’s three acquisitions “more difficult” as these airlines’ revenues declined. But he said the dire circumstances were also helping managements to implement otherwise seemingly impossible cost cutting.

Lufthansa signed the Brussels deal late last year, and now owns 88 per cent of Austrian. But the recession is holding up the BMI deal, as Lufthansa and Sir Michael Bishop, BMI chairman and controlling shareholder, argue over who should pay for a capital restructuring.

Regulation not recession may yet prove a bigger hurdle. The European Union’s competition watchdog launched a deeper, “phase two” investigation of the Brussels deal and has as yet made no ruling on Austrian .

Mr Gemkow said that Lufthansa had been “surprised” by the level of EU scrutiny, even if he now expected “a close dialogue” between all involved to lead to “a normal process” for Brussels Airlines. A decision is due by July 1.

The EU has to decide by June 17, whether to launch a similar “phase two” inquiry into the purchase of Austrian Airlines, although a thornier issue could be getting the EU to sign off on €500m ($681m) in “restructuring aid” by the end of July. “If this is not approved, it would raise fundamental questions about the feasibility of the deal,” Mr Gemkow warned, noting that Lufthansa had amassed its stake in Austrian only on condition of regulatory approval.

With executives busy finessing two deals with EU watchdogs and the BMI deal with Sir Michael, Mr Gemkow said Lufthansa’s management was sufficiently “tied up” to stop it from contemplating more transactions.

With Lufthansa hubs in Frankfurt and Munich, its Swiss International unit operating out of Zurich, and Austrian’s base in Vienna soon to come into the fold, the company says it is well placed to serve most of Europe.

One gap is Scandinavia. Mr Gemkow said SAS had an “outstanding role” among Lufthansa’s partners and talks to “deepen commercial co-operation” were taking place. “But a transaction is currently not on the table.”

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