Vienna - Lufthansa AG on Friday signed a deal in Vienna to
buy 41.65 per cent of Austrian Airlines from Austria's state holding
OeIAG, creating Europe's biggest airline.
The debt-ridden flag carrier will be sold for the token price of
366,000 euros (465,000 dollars), OeIAG confirmed in a statement,
while Austria will inject 500 million euros into the company.
The German carrier plans to take over 100 per cent of Austrian
Airlines, first through the privatization, and then through buying
free-floating shares.
The closing of the deal still depends on approval from the
European Commission, which is expected for next spring.
To restructure Austrian Airlines, which carries 900,000 euros of
debt and expects to end the year with a net loss of 415 million
euros, quality and profitability would have to be raised, Lufthansa
chief executive Wolfgang Mayrhuber said at a press conference in
Vienna.
'This will not be easy, we know that,' said Mayrhuber, referring
to the present global economic climate.
The Lufthansa chief said he hoped for a turnaround within around
three years, and to create synergies worth 70 million euros. Under
the deal, Lufthansa will pay an additional 162 million euros if
Austrian Airline's performance improves.
The total price, including payments for the free-floating shares,
is expected to amount to 377 million euros.
The Austrian flag carrier, which had come under pressure from high
fuel prices and decreasing demand, will retain its brand, and
Lufthansa agreed to expand Austrian Airline's business and keep its
long-distance connections.
Through the takeover, Lufthansa will become Europe's biggest
airline with around 74 million passengers annually, with Air
France-KLM in second place with 74 million passengers, according to
the Austrian Aviation Association.
The European Commission has yet to consider the deal's impact on
competition, as well as the legality of a 500-million-euro cash
injection.
OeIAG chief executive Peter Michaelis said he hoped get all
necessary approvals by around May of next year.
Michaelis acknowledged that it had not been easy for Austrian
politicians to agree to the sale of its flag carrier. 'It is a
national symbol,' he said.
Lufthansa would try to keep as many Austrian Airlines employees
and flight connections as possible, Mayrhuber indicated, while saying
it depended on economic developments.
'Only profitable jobs are secure jobs,' he said. He refused to
comment on the fate of current Austrian Airlines chief executive
Alfred Oetsch.
Austrian Airline's revenue amounted to 2.5 billion euros in 2007,
around 10 per cent of Lufthansa's sales.
With 100 aircraft and around 8,000 employees, Austrian Airlines
has a strong focus on Eastern European and Middle Eastern
destinations.
The airline was founded in 1957 as a state-owned company. Between
1988 and 2007, the state's share decreased to 42.75 per cent through
a series of privatization steps.
French-Dutch carrier Air France-KLM and Russian domestic carrier
S7 had also shown interest in Austrian Airlines, but neither of them
submitted valid bids.
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