Deutsche Lufthansa AG’s share price up, strikes a preliminary agreement for cooperation with Air China Ltd

A preliminary agreement between Deutsche Lufthansa AG and Air China Ltd was officially announced today during a visit of the German Chancellor Angela Merkel to China. Both companies are members of the Star Alliance group of airlines. The step by Lufthansa and Air China is to be made in order to expand the commercial ties as travel and trade between Germany and China is growing.

According to the terms of the deal, the two companies are to start a joint venture that is to provide them with the opportunity to share revenue on certain routes. Similar agreements currently exist between Deutsche Lufthansa AG, United Airlines and Air Canada.

The Chief Executive Officer of Deutsche Lufthansa AG – Mr. Carsten Spohr – made an official statement, which was cited by Bloomberg: “We are delighted that, together with Air China, we will be able to offer our customers, particularly in Europe and China, even better flight connections and services in the future.”

As reported by the Wall Street Journal, Air China Ltd also commented on the preliminary agreement though an official representative, who however, refused to be identified: “We aim to deepen and further expand our relationship in the face of rising competition from other airline alliances.”

The two companies have already been working together thanks to a code-share agreement, due to the fact that both are members of the Star Alliance. Now, the new joint venture between Deutsche Lufthansa AG and Air China Ltd is to be in force by October 2014. The collaboration between the two carriers is considered able to improve the coordination and ticket pricing between the German and the Chinese company.

Deutsche Lufthansa AG was gaining 1.25% to trade at 15.83 euros per share by 9:06 GMT, marking a one year change of +3.74%. According to the information published on the Financial Times, the 27 analysts offering 12-month price targets for Deutsche Lufthansa AG have a median target of 18.00, with a high estimate of 22.20 and a low estimate of 13.00. The median estimate represents a 15.16% increase from the last price of 15.63.