German charter airline LTU International Airlines could follow AOM-Air Liberte out of the Swissair Group portfolio before completion of a restructuring plan in 2003 if talks over refinancing contributions with other shareholders are not resolved.

LTU is owned jointly by the troubled Swiss national carrier (49.9%) and local bank Westdeutsche Landesbank (10.2%), with tour operator Rewe Touristik holding the remaining shares. Despite record passenger figures this summer, LTU still needs an additional cash injection for restructuring ahead of a planned return to profitability in 2004.The airline says high fuel prices and the strength of the dollar have damaged its recovery attempts.

Rewe has stated an intention in the past to acquire a full charter airline to compete with Thomas Cook's Condor and provide a fares-only budget service for its Tjaereborg brand.

Swissair is publicly committed to fulfilling its restructuring plan with the charter carrier, which has already soaked up c225 million ($205 million) in development funds in the past two years. Swissair has guaranteed to underwrite LTU's losses until 2005, and despite signs that the charter operator will return to profitability next year, LTU's chief executive Sten Daugaard told German financial newspaper Handelsblatt last week that "it is clear that Swissair Group want to pull out sooner rather than later".

Swissair says that it is expecting to make an additional capital contribution to LTU, but that the amount is not yet settled. Swissair's chairman Mario Corti has pledged not to put any further funding into loss-making companies.

LTU says all shareholders have an obligation to fund the redevelopment plan and decide among themselves where the money comes from. Rewe is likely to come under pressure to pay more towards the airline's restructuring, ahead of a possible eventual take-over.

Source: Flight International