Andrew Doyle/MUNICH François Legros/PARIS

Air France has acquired a controlling stake in franchise partner Regional Airlines, strengthening the French flag carrier's grip on feeder traffic into its Paris Charles de Gaulle hub.

The deal will see Air France Finance, a wholly owned subsidiary of the airline, buy the Dubreuil Group's 70% stake in Regional for Fr280 million ($43 million). The remaining 30% - other than a small employee-held stake - is publicly held, and Air France is offering minority shareholders a substantial premium to surrender further shares.

Regional was established in 1992 through the merger of Air Vendée and Bordeaux-based Airlec. It operates 25 aircraft, including Embraer EMB-120 Brasilias, ERJ-135/145s and Saab 2000s. It has commitments for up to 15 larger ERJ-170/190 regional jets.

The airline is based in Nantes, but has a network centred on Clermont Ferrand, having pioneered the hub concept in Europe. Although Regional operates 250 daily flights, only one of its routes serves Paris. The airline covers 24 points in France and 18 foreign destinations, both under its own branding and as an Air France franchisee, and carried 937,000 passengers last year - mostly high-yield business travellers.

Regional has reported a turnover of Fr1.228 billion for its 1999 financial year, 15% up on 1998's Fr1.07 billion, when it posted a net result of Fr21.48 million. It has commercial partnership agreements with Iberia, Lufthansa, KLM, SAS and Alitalia.

Air France already has a financial interest in Proteus Airlines, which itself recently purchased Flandre Air. Proteus is 22%-owned by the French flag carrier's global alliance partner Delta Air Lines. Air France also has a large minority stake in Ireland's City Jet, and is extending until 2007 a franchise agreement with Morlaix, Brittany-based Brit Air, which reports suggest was itself interested in Regional.

Source: Flight International