British Airways and Hainan Airlines are competing with Lufthansa for a controlling stake in Belgian carrier Brussels Airlines.

The two carriers are still in talks with SN Airholding, Brussels Airlines' parent company, although Lufthansa is regarded as management's favorite new owner.

Late last week, Lufthansa said it was in "constructive negotiations" with SN Airholding to acquire a 45% stake in the airline for EUR65 million. The remaining stake could be taken over after two years for a price that is linked to the carrier's financial performance. Lufthansa is currently conducting due diligence at Brussels Airlines and both sides have said they expect to close a deal within the next few weeks.

However, after Brussels Airlines briefed its board on details of the Lufthansa plan this week, some of its investors appear to have concerns that the negotiated price is not high enough. If that faction of the board gains strength, BA and Hainan may be able to still get the airline on price. Officials declined to comment.

SN Airholding was set up in 2001 following the demise of former national carrier Sabena. A number of Belgian investors formed the unit to build up a new airline based on Sabena's former regional unit Delta Air Transport.

In 2006, Richard Branson's Virgin Group entered with a 30% offer following the merger of Brussels Airlines with Virgin Express. The original investors are understood to be willing to sell at least in the medium-term, and Branson may have lost his strategic interest in the airline, too.

For BA, Brussels Airlines would be one of the last opportunities to gain a foothold in Central Europe. The airline has been focusing on its Heathrow hub for many years and is currently in merger talks with Iberia. But even if they turn out to be successful, BA still lacks presence in the center of Europe. In a major strategy shift, it has also indicated its interest in buying Austrian Airlines and investing in Alitalia. Brussels Airlines already has links to BA, American Airlines and Iberia amongst others--all of them Oneworld members.

Privately owned Hainan Airlines is understood to be looking for ways to establish a presence in the European air transport market and could use Brussels as a hub for its long-haul services into China. Traffic from China is an important market for Brussels Airlines, too, as it has one of the better-developed networks of European carriers into Africa. China has been intensifying its economic ties to Africa because it hopes to exploit the continent's natural ressources.

Lufthansa is keen on getting better access to the potentially lucrative Belgian intra-European market, and could also use a better African network. With no current alliance links to SkyTeam, Air France-KLM appears to be not in the race.