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UPDATE 1-Merger talks among German airlines stall -sources

Mon Aug 18, 2008 11:24am EDT

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FRANKFURT, Aug 18 (Reuters) - Merger talks between German charter airline Condor (AROG.DE) (TCG.L) and TUIfly (TUIGn.DE) as well as budget Lufthansa (LHAG.DE) unit Germanwings have stalled, sources close to the situation told Reuters on Monday.

A source close to the matter said a merger of Lufthansa's Germanwings and Condor was a possible alternative to the three-way merger.

"The culture would match, and it would make sense," the source said.

TUI, TUIfly, Lufthansa and Germanwings all declined to comment.

Condor joined merger talks last month after Air Berlin (AB1.DE) dropped plans to buy it, in part due to rising kerosene prices.

Key points of conflict in the talks were working conditions for TUIfly pilots, the stakeholder structure, the locations for the planned charter airline as well as its branding, the sources said.

Lufthansa owns around a quarter of Condor, with the rest owned by British-German travel operator Thomas Cook.

TUIfly belongs to tourism and shipping business TUI. (Reporting by Angelika Gruber, editing by Will Waterman)



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