Life is never dull in Lufthansa’s executive suite these days. Now back in the frame as the preferred bidder for Alitalia, while a weekend change of government in Austria may redraw Austrian Airlines’ privatisation plans, all make for another burst of adrenaline. But the airline’s headlong rush to buy almost anything that moves is certain to ruffle some feathers - quite apart from raising questions about Cologne’s ability to manage a growing raft of acquisitions and the inter-hub competition issues that they raise. 

Europe’s regional and international networks are sufficiently interconnected that it is hard to make a move without affecting some other part. So, last week, when Lufthansa suddenly reappeared as the favoured buyer of Alitalia’s next existence, at the other end of Europe SAS’s share price dived. And, while Swiss’ management is remaining stoically quiet, the team at Zurich must be beginning to wonder just what will be left of its role with Lufthansa if the German flag also effectively controls both Austrian Airlines and Alitalia.

SAS share price: Jun-08 to 28 Sep-08

Source: Centre for Asia Pacific Aviation & Yahoo Finance

It is possible that both Lufthansa and the Italians are using a possible tie-up as a lever to encourage Air France-KLM to pay more. But there is supporting logic in the fact that Italy’s white knight, CAI, is like Lufthansa, preoccupied with Milan’s Malpensa, whereas Air France prefers to hub over Rome. This would probably make Lufthansa a better fit with CAI’s aspirations.

A purchase of Alitalia would not necessarily mean that SAS is off the Lufthansa menu. But in these uncertain times, any airline that is troubled will be buffeted relentlessly by its shareholders. Just as it looked as if there might be a light at the end of the tunnel for SAS, the market thinks Mr Mayrhuber’s visit to Rome has closed down that possibility. And, to the extent that this reduces the market value of SAS, Lufthansa is unlikely to lose, whatever its intentions.

Lufthansa’s many airline links

Source: Centre for Asia Pacific Aviation

The future of SAS also in turn has some bearing on bmi, as the Scandinavian carrier has a 20% shareholding, beside Lufthansa’s 30%-minus one share. bmi is still sitting on a luxurious put option which allows majority owner, Sir Michael Bishop, to sell his remaining 50% to Lufthansa at well above today’s market level; that option is exercisable until next year. This triangular relationship in turn is of great interest to the Virgin Group, the vendor of its Brussels Airlines equity to Lufthansa; Virgin lusts after bmi’s Heathrow slots, which may fall Lufthansa’s way if Sir Michael exercises his put.

SAS of course also owns loss-making Spanair, a low cost operator in the Spanish market. Despite deciding not to sell the airline last summer, SAS may well be forced to revisit that task unless things improve dramatically in the next few weeks. In fact, despite substantial leisure operations by Lufthansa’s various arms to Spain, that country is in danger of being a rare significant market where the German flag carrier does not own an airline.

Whether Lufthansa’s recent acquisitive tendencies are the result of irrational exuberance or are a more calculated measure to ensure that no-one else has an easy run at buying a competitor - or a mixture of both - its competitors (and its partners) are certainly being kept guessing. The carrier has plenty of money in the bank. But if it loses sight of the main game, that may not continue to be the case.

(Meanwhile, spare a thought for Serbian government-owned, Belgrade-based Jat Airways, which was apparently unable to attract a single bidder by last Friday’s deadline for formal offers, possibly tipping the longstanding airline into bankruptcy.)