TEAM and FLS Aerospace share more than just an interest in the same industry. The two groups are competing in a increasingly cut-throat market where strategic alliances are becoming the order of the day.

TEAM desperately needs a partner as its parent is unable to pump in more money and the aircraft maintenance operation could be marginalised by bigger players. FLS, a highly regarded company, is also looking for alliances to increase its own business.

The amalgamations and strategic alliances currently taking place in the airline business are also happening in the aircraft maintenance and overhaul sector. "Amalgamate, co-operate or suffer the consequences," is how one aircraft maintenance source put it yesterday.

The deal is as important to FLS as it is to TEAM if the Danish group wants to compete against the big players. What FLS can offer TEAM - aside from its own contacts and experience - is the backing of a big conglomerate. FLS is owned by FLS Industries, a publicly-quoted company which has an annual turnover of £2 billion.

The aerospace division is based at Stansted Airport, with operations at Stansted, Manchester and Gatwick. This division has an annual turnover of around £100 million.

By contrast, TEAM's turnover is around £85 million. Although it is losing money, it may turn an operating profit in 1998. FLS customers include KLM, Air UK, British Airways, Laker Air and Ryanair. TEAM's customers include Aer Lingus, Virgin and Lauda Air.

The most immediate benefit to TEAM will be business worth £25 million which FLS will be able to divert to TEAM. The work involves component overhaul which FLS currently sub-contracts. Aer Lingus said last night that there was positive synergy between FLS and TEAM with no overlap in their respective customer base. Aer Lingus chief executive, Mr Gary McGann, told The Irish Times that FLS had a very good customer base and was a very focused company.

It is understood that some years ago FLS and TEAM were competing for the same customers, but FLS re-adjusted its focus to different targets.

Mr McGann said that, although there was some cross-over in the types of aircraft both companies serviced, FLS did not have the capability to service A330 and A340 aircraft currently used on transatlantic flights. TEAM does have this capacity.

The merged group would be a very serious player in global terms, he said, and would have a far greater span of capabilities to offer prospective customers. "It will be a very attractive portfolio of customers," he added.

Aer Lingus has been sounding out possible investors for TEAM for at least a year. FLS is already familiar with TEAM's work - like other industries, it is a relatively small world. Despite its difficulties over the years, industry sources said last night that the company had a very good reputation. FLS employs 1,117 people in its aerospace division. TEAM employs around 1,500. Mr McGann said last night that he expected the new owners would increase rather than decrease employment in TEAM.

Several parties pointed out that FLS would also be a good cultural fit with TEAM. FLS Aerospace is a European company with a unionised workforce. "They don't have the short-fuse approach that some international companies might have," said one source.

FLS will now undertake due diligence and the final deal should be wrapped up within 90 days. Mr McGann said investment in TEAM would be needed. He said FLS's parent company had been around for 100 years and it was very committed to the aerospace industry, having invested substantially in it over the years.