Austrian to axe vice presidents
Lufthansa's takeover of Austrian Airlines has been given the green light today (August 28) after the European Commission (EC) signalled its approval.
The EC announced an end to its formal investigation into the takeover but said certain conditions must be met.
Austrian has also announced today it is to axe ten of its 24 vice presidents as part of a wider restructuring programme.
The airline, which has struggled from falling demand and mounting debt, said it would reduce its management by as much as 45%.
A Lufthansa spokesperson told ABTN it had not influenced Austrian's decision to axe management jobs.
But Austrian has in the past admitted cutting costs in the hope that the EC would approve its takeover by Lufthansa.
EC regulators said any aid granted by the Austrian state as part of the sale was to be "kept to a minimum".
Other EC conditions of the sale include a cut in capacity and a cap on growth in order to protect competition.
Lufthansa has also agreed to sell lucrative slots on routes between Vienna and key European cities to rivals.
Lufthansa said the EC conditions and the sale of slots on routes out of Vienna were "economically acceptable".
The Austrian government will sign over its 41.56% stake in Austrian to Lufthansa on September 3, a date previously dismissed as speculation.
At €4.49 per share, Lufthansa will pay the Austrian state €366,268.75, less than the €500m in "state aid" paid back to the airline.
The EC said the sale of Austrian to Lufthansa was within community law despite the "negative price" paid.
EC transport commissioner Antonio Tajani said: "This decision is yet another step taken favouring the consolidation of the airline sector.
" It will lead to a market that is undistorted by state aid, with an ultimate benefit for passengers."
The EC accepted that the €500m government aid was to "compensate for Austrian Airlines' high level of historical debt."
But the Commission said Lufthansa must now cut Austrian's capacity by 15% on last year's levels by the end of 2010.
Austrian's growth in capacity is to be capped at Association of European Airlines (AEA) averages until 2015.
The EC also accepted a "debtor warrant" to be given to the Austrian state by Lufthansa which might lead to additional payments.
Lufthansa's share offer for Austrian was approved by 85% of the shareholders, above the 75% threshold needed under the takeover terms.
But Lufthansa said the remaining shares held by private stakeholders would be bought as part of an ongoing public offering.
Lufthansa had until August 31 to walk away from the deal if it had not been granted EC approval.
Earlier this month the EC announced that competition concerns surrounding Lufthansa's takeover of Austrian had been successfully dealt with.
Lufthansa has offered to give up slots on routes between Vienna and Stuttgart, Cologne, Frankfurt, Brussels and Munich.
Three daily flights to Stuttgart and three to Cologne could be freed up as part of the deal.
Five flights a day to Frankfurt and up to four flights on Munich and Brussels routes may also be given up by Lufthansa.
Austrian budget carrier Niki, Slovakia's SkyEurope and Slovenia's Adria Airways have been singled out as being interested in the routes.
Last month the EC began a second investigation into the takeover, citing concerns that competition could be reduced on routes Viennese routes.
The Commission said it had considered "state support for Austrian Airlines in the framework of a separate investigation under EC Treaty state aid rules."
www.austrian.com [1] www.lufthansa.com [2] http://ec.europa.eu/index_en.htm [3]