EU May Delay Lufthansa-Austrian Deal
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The European Union will ask Lufthansa for more concessions to approve the carrier's purchase of Austrian Airlines, Austrian government sources said Monday, possibly putting the deal at risk.
The sources familiar with the situation said it was looking as if the EU's executive body would examine the deal more closely rather than rubber-stamping it this Wednesday, when a deadline expires.
"There were demands (by the Commission) that AUA cuts more flights than initially offered, and those demands are now being looked at by AUA's management in cooperation with Lufthansa," one of the sources, who declined to be identified, said.
"They could still approve the deal in July, but the big question mark is if it is still attractive for Lufthansa under those conditions," the source said.
A spokesman said the Commission would definitely make a decision on Wednesday either to approve the deal or launch a detailed probe. He declined to say which way the Commission was leaning.
Lufthansa agreed in December to buy state-controlled AUA in a deal incorporating EUR500 million euros (USD$700 million) in aid from the Austrian government to reduce the loss-making airline's EUR1 billion debt pile.
Both the acquisition itself and the state aid require EU anti-trust approval.
Lufthansa has said from the outset that it would walk away from the deal if EU conditions were too onerous. CEO Wolfgang Mayrhuber last week reiterated he was not interested in buying what he called a "little AUA".
Lufthansa declined to comment on the EU deliberations on Monday but reiterated that if there was no approval by July 31 it could walk away.
AUA and OeIAG declined to comment.
The second government source confirmed that approval will probably not be granted when the Commission meets on Wednesday. "It looks as if the decision will be postponed again."
If the deal falls through, analysts expect AUA will need a significant cash injection in order to survive. The airline's management has said it would have to cut its fleet by as much as half its current size if it had to operate alone.
