LHamburg  - The planned merger of Lufthansa's subsidiary Germanwings, Thomas Cook-owned Condor and TUIfly could be facing collapse, the daily Financial Times Deutschland reported Thursday.

The paper quotes a source involved in the negotiations as saying that talks were becoming drawn out and a merger of three airlines was growing increasingly unlikely.

When takeover-talks were announced end of August, they were seen as a further part of the German travel market shake-out. In July, Air Berlin withdrew its interest to take out a stake in Condor, throwing the low-budget airline back on the market.

High fuel prices and declining consumer confidence has increased the pressure on Germany's low-budget airlines during holiday business this summer.

Despite rocketing fuel prices, however, air traffic in Germany, which is Europe's largest travel market, turned in a solid performance during the first half of 2008.

While the number of passengers departing from German airports, slowed by only 0.2 per cent to 46.2 billion compared with 2007, domestic traffic recorded a 6.6 per cent growth rate.

Since Air Berlin and Thomas Cook cancelled the 700-million-dollar negotiations over Condor in July, the oil price has fallen from roughly 150 dollars per barrel by almost 50 per cent, helping to ease the pressure on the budget airline industry. (dpa)