Julian Moxon/PARIS

The SAir Group has taken a 44% stake in French regional airline Air Littoral, giving it an entry into the south of France market and meeting the loss-making carrier's need for recapitalisation and development funding.

The move came after speculation that another French independent, Britair, was in line to buy into the Montpellier-based Air Littoral. Other international airlines, including British Airways, Air France and Lufthansa had also been considered, but according to Air Littoral president Marc Dufour, none met his condition that any stakeholder should be ready to take a financial as well as commercial stake in the airline. Besides paying anything up to Fr200 million ($35.2 million) for the stake, SAir, the parent of Swissair, has agreed to pay off Air Littoral's debt which is believed to be around Fr200 million.

According to SAir Group executive vice-president Georges Schorderet, the French airline provided the Swiss carrier with an "extremely valuable" opportunity to break into a lucrative market where Air Littoral, with hubs in Nice and Montpellier and a network spanning the country, is already in a strong position.

The French carrier will join the Qualiflyer Group which comprises nine other European airlines, including another French independent, AOM. Schorderet does not rule out the possibility of taking a stake in AOM. "It interests us and it meets our strategic need to move into more European hubs," he says.

The existing franchising deals with Air France and Lufthansa are expected to be terminated. "We will respect the agreements, but we also would like to get the aircraft back in order to develop our route structure." says Dufour. The agreement with Air France was to last until 2003, and the arrangement with Lufthansa for between 12 and 18 months. Talks with both airlines are set to begin shortly.

Air Littoral's fleet includes ATR 42-500s, Bombardier Canadair Regional Jets , Fokker 70s and a Fokker 100. The carrier accumulated a Fr80 million debt in 1997 after a pilots' strike and because of the cost of developing the Nice hub. Performance this year has been better, with Dufour pointing to a 45% growth in its Nice operation, and passenger numbers growing by 18%. "We're on track to make a profit", he says.

Source: Flight International