UPDATE 2-Condor joins merger talks with TUIfly, Germanwings
(Adds background detail, updated shares)
LONDON, Aug 28 (Reuters) - Thomas Cook's (TCG.L) charter airline Condor has joined talks with TUI Travel's (TT.L) TUIfly and Lufthansa's (LHAG.DE) Germanwings over a three-way merger that would create a national rival to Air Berlin (AB1.DE).
The companies said discussions were at an early stage, no commercial terms had been agreed, and there was no certainty of a deal taking place.
A combination of the three airlines would create a carrier with 142 aircraft carrying 30 million passengers annually, putting it ahead of Air Berlin, which carries 28 million passengers each year in its 133 aircraft.
TUI Travel has been in talks with Lufthansa since the start of the year over a merger between its charter airline TUIfly and Germanwings, which it hoped would lead to cost savings in relation to ground facilities, maintenance, and catering.
Thomas Cook joined the talks after German carrier Air Berlin (AB1.DE) scrapped plans to buy Condor blaming soaring oil prices and worsening economic conditions since the deal was first announced last year, sources familiar with the situation told Reuters in July.
Thomas Cook said at that time it was "pursuing a range of other available options" for Condor.
Blue Oar Securities analyst Derren Nathan said on Thursday the airlines' announcement will "come as no surprise to the market".
"Consolidation in the German leisure carry market is inevitable and TUI Travel has said that until the situation is resolved this will be a hurdle to improving operational performance," he said.
However, Nathan added that a three way tie-up is likely to be scrutinised closely by the German authorities and any deal is likely to be a lengthy process.
Competition among German airlines had intensified following Air Berlin's purchase of domestic rival DBA in 2006 and charter airline LTU in 2007 as the carrier went on a spending apree to expand its flight network.
At 1055 GMT, shares in TUI Travel were 0.7 percent lower at 202-3/4 pence, with Thomas Cook down 0.8 percent at 213-1/2 pence, while Lufthansa was 0.1 percent higher at 14.4 euros. (Reporting by Matthew Scuffham; Editing by Will Waterman/Erica Billingham/Rory Channing)
