Lufthansa Group has confirmed that Brussels Airlines (SN, Brussels National) will become a part of the Eurowings Group following its takeover in the new year.

The German carrier group said in a statement that its Executive Board has now decided to exercise a call option to acquire the outstanding 55% stake in Brussels Airlines' parent, SN Airholding, that it does not currently own. The call option will come into effect by December 31, 2016, with the transaction expected to close by the beginning of January 2017.

"Following the acquisition of the 45% share of SN Airholding eight years ago, we now want to take a next step in our already very solid and successful cooperation," Carsten Spohr, Chairman of the Executive Board and CEO of Deutsche Lufthansa AG, said. "As a longstanding shareholder and partner of Brussels Airlines, we are already closely linked to each other. Accordingly, we value Belgium and especially Brussels as highly attractive markets that perfectly complement our offer in the heart of Europe. In addition, Brussels Airlines has a competitive cost structure already and brings a well-established long-haul network, especially to and from Africa, to the Lufthansa Group portfolio."

Lufthansa Group says it will pay EUR2.6 million (USD2.7 million) for the stake with proceeds to be paid to SN Airholding's thirty shareholders which include blue-chip firms, financial institutions and investment groups such as the Virgin Group, Fortis, ING, Suez, Tractebel, Brussels Airport, la Société Régionale d’Investissements Wallone (SRIW), and Société Régionale d’Investissements Bruxelloise (SRIB).

After the acquisition is completed, Brussels Airlines will continue to operate its twenty-three long-haul destinations as well as seventy-nine destinations within Europe under the umbrella of Eurowings Group. The ‘Brussels Airlines’ brand will be retained albeit accompanied by the added title of 'Member of the Eurowings Group'. The common goal of Lufthansa and Brussels Airlines is to further strengthen the market position in the Belgian Airline market.

In terms of operations, Lufthansa Group will continue with Brussels Airlines' push to consolidate its narrow-body fleet around the A320 Family of aircraft. However, in the medium term, investments are planned to further improve its fleet efficiency and increase capacity on its short- and long-haul networks. The Germans have reportedly committed to investing EUR600 million (USD609 million) into Brussels Airlines to cover the cost of leasing seven longhaul-capable aircraft for a period of twenty years.

Access to Lufthansa Group's economies of scale is also expected to generate mid-double digit million euro contributions on an annual basis. In the short-term, integration costs may burden earnings at first.

In terms of leadership, Carsten Spohr will join the Brussels Airlines Board as Co-Chairman, alongside Viscount Etienne Davignon. Three existing Belgian members will also remain onboard. Brussels Airlines management will continue to be lead by CEO Bernard Gustin. In addition, an Advisory Council will be established and will support the integration process.