Austrian in bid to save Lufthansa deal

Carrier may extend €225m cost cutting

Lufthansa's takeover of Austrian Airlines has been thrown into doubt.

Austrian executive board member Peter Malanik today (June 29) said the original plan may not be enough in the current economic downturn.

Mr Malanik was reported as saying that talks with trade unions over possible lay-offs are being held, but could not say when and how many cuts would be made.

The European Commission which is investigating the deal is also set to put off its decision which was due this week.

Austrian Airlines has been cutting costs since the beginning of the year to ensure the takeover by the German carrier went ahead.

"Certain economies made by Austrian Airlines are absolutely to do with the Lufthansa deal," a spokesperson for Austrian told ABTN today (June 29).

Austrian announced a €225m cost cutting plan earlier this year to include capacity cuts, short-time working for staff and the suspension of pension fund contributions.

But the spokesperson was unable to confirm Mr Malanik's latest comments.

"There have been many statements from Peter Malanik made regarding economic campaigns, but none regarding any new cost cutting," he said.

"With the current economic climate, almost all airlines are making reductions as necessary."

Reports yesterday said the EC plans to look more closely at the deal.  It had been expected to announce its decision this Wednesday (July 1).

Lufthansa's share offer for Austrian was approved last month by 85% of the shareholders, above the 75% threshold needed under the takeover terms.

The EC launched its investigation into the take over in February citing three elements of the deal with which it was unhappy.

In the first part of the deal, Lufthansa agreed to pay the Austrian government €366,268 for its 41.6% stake.

The second part of the agreement was that the Austrian state received a "debtor warrant" from Lufthansa which might lead to additional payments.

The last element was that the Austrian government paid Lufthansa €500m for a "capital increase" in Austrian Airlines.

As well as concerns over the price, the EC said it also doubted "whether the sale was truly open, transparent and unconditional and whether the State really acted as a market economy investor."

The EC added that it also doubted whether the amount of aid had been "kept to a minimum" and whether the re-structuring plan would restore Austrian to long term viability as quickly as possible.

www.austrian.com   www.lufthansa.com   http://ec.europa.eu/index_en.htm