Lufthansa, Ryanair row over planes for Austrian carrier Laudamotion

FRANKFURT (Reuters) - Lufthansa plans to end an agreement to lease planes to Laudamotion, saying the Austrian holiday airline has failed to meet payments, leading to a dispute with its backer Ryanair RYA.I.

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The row highlights a battle for market share in Germany and Austria after the collapse of Air Berlin and shows how keen airlines are to get planes against the backdrop of recent Airbus AIR.PA delivery delays due to engine issues.

Laudamotion, formed out of the remains of Niki that was part of Air Berlin, flies a fleet of 9 Airbus A320s leased from Lufthansa and 10 Boeing BA.N 737 jets from new shareholder Ryanair.

“Laudamotion has recently failed – repeatedly – to meet its contractually-agreed lease payment obligations,” Lufthansa said in a statement on Friday.

Lufthansa said it needed planes to expand its Eurowings budget carrier and it has therefore exercised a right to terminate the lease agreements.

Ryanair denied that it had failed to meet lease payments and said Lufthansa had failed to pay Laudamotion for carrying out flights on its behalf during March-May.

“Laudamotion has repeatedly honoured both its aircraft lease payments and maintenance reserves to Lufthansa. Lufthansa’s claims of ‘repeated failure’ to pay is false,” the Irish carrier said.

Whether Lufthansa can end the contracts depends on a decision by a court in Britain, with a hearing expected on July 20.

Ryanair, which on Thursday received approval to take its stake in Laudamotion up to 75 percent from a current 24.9 percent, said Laudamotion was under threat from the German group.

“Lufthansa is abusing its dominant position in the German and Austrian markets in a blatant attempt to eliminate a much smaller, Austrian competitor, Laudamotion,” Ryanair Chief Legal Officer Juliusz Komorek said in a statement on Friday.

The collapse of Air Berlin, Germany's second-largest airline, led to a fight among carriers easyJet EZJ.L, IAG and Ryanair to pick up the pieces and gain a foothold in the German and Austrian markets and challenge incumbent Lufthansa.

“The suggested attempts to spike Laudamotion’s start-up suggests that (Lufthansa) sees the carrier as a threat to its dominant position in the German market, especially on routes to Spain, with a more robust Laudamotion a bigger threat to it in 2019,” Goodbody analysts wrote in a note.

Lufthansa had wanted to acquire Niki, plus other parts of Air Berlin, but was forced to abandon its Niki plans for anti-trust reasons.

It was told by the European Commission during the takeover review to make planes available to any new owner of Niki. Ryanair said Lufthansa had failed to deliver 2 of 11 planes and had delayed delivering others.

Lufthansa rejected the accusations, saying it had fully complied with all Commission obligations.

Lufthansa said it had offered to sell 10 planes to Laudamotion but that Laudamotion wanted to lease them instead. The tenth plane is due to go to Laudamotion at the end of July, a Lufthansa spokeswoman said.

Reporting by Maria Sheahan and Ilona Weissenbach; Additional reporting by Kirsti Knolle; Writing by Victoria Bryan; Editing by Louise Heavens and Jane Merriman