Germany's Lufthansa gets first say on Air Berlin asset sale-union

By Victoria Bryan and Maria Sheahan

BERLIN/FRANKFURT (Reuters) - A first round of formal talks for the sale of insolvent German airline Air Berlin's assets will be held with its bigger local rival Lufthansa on Friday, ahead of other prospective bidders, a senior labour union official said.

"Only Lufthansa will initially be part of the talks ... As far as I know, the other bidders will be invited for talks afterward and then an overall package will be put together," said Lufthansa's deputy chair Christine Behle, who represents labour union Verdi on the company's supervisory board.

She also told Reuters negotiations would begin on Friday and she expected them to continue through the weekend.

Air Berlin, Germany's second-largest airline, filed for bankruptcy protection on Tuesday after shareholder Etihad Airways withdrew funding following years of losses.

With many Germans travelling on their summer holidays and a September general election looming, Berlin has granted a bridging loan of 150 million euros ($176 million) to keep Air Berlin's planes in the air for up to three months and secure 7,200 jobs in Germany while buyers for its assets are found.

That means that the race is on to carve up the airline and obtain anti-trust approval for any deals before Air Berlin runs out of cash.

Transport Minister Alexander Dobrindt has called for Lufthansa to buy a major part of the assets, saying Germany needs a "national champion" in international aviation.

"That is why it is urgently necessary that Lufthansa can take over significant parts of Air Berlin," he told daily newspaper Rheinische Post.

His comments came after rival European airline Ryanair filed a complaint with German and European Union competition authorities over the handling of the insolvency process, which its chief executive describes as a "conspiracy".

Germany's transport ministry already faces allegations by the European Commission of maintaining a cosy relationship with its domestic industry and questions about whether authorities did enough to uncover an emissions scandal at carmaker Volkswagen, which is partially state-owned.

AIRCRAFT DEAL

One scenario Lufthansa Chief Executive Carsten Spohr has presented to the flagship carrier's supervisory board is that it could take on as many as 90 of Air Berlin's roughly 140 leased planes, a person familiar with the matter told Reuters.

That would include the 38 aircraft that Lufthansa is already leasing from Air Berlin and its leisure airline Niki, which is not part of the insolvency proceedings.

"These are ideas that Lufthansa is bringing into the talks," the source said, adding no decisions had been made yet. Another source said the number of aircraft Lufthansa wanted to take was smaller.

Air Berlin has been in preliminary talks with a total of three aviation firms, including Lufthansa, over the sale of its assets, Chief Executive Thomas Winkelmann told Frankfurter Allgemeine Zeitung (FAZ), and aims to strike deals with at least two of them by the end of September.

Earlier this week a source familiar with the matter said easyJet was among those in talks, and Thomas Cook's German airline Condor said it was ready to play "an active role" in Air Berlin's restructuring.

The airline's demise also offers Lufthansa and rivals a chance to acquire coveted runway slots at Air Berlin's hub airports, Berlin Tegel and Duesseldorf, with Germany's largest airline keen to defend its domestic position against the incursion of low-cost rival Ryanair.

RedaktionsNetzwerk Deutschland (RND), a group which represents German newspapers, cited government sources as saying that Lufthansa, its budget carrier Eurowings and Condor would likely snap up Air Berlin's most valuable slots.

RND said a few slots could also go to Ryanair.

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(Additional reporting by Sabine Wollrab; Editing by Alexander Smith, Greg Mahlich)