Lufthansa Blinks In AUA Bid Standoff

Fresh concessions to regulators from Lufthansa to push through its purchase of Austrian Airlines made a successful deal seem more likely and sent the Austrian carrier's shares higher Friday.

The European Commission said late on Thursday that the German flagship carrier had submitted a new proposal aimed at tackling antitrust concerns over the deal.

The offer, the details of which remained unclear, came one day after Austrian Airlines (AUA) approved a EUR150 million euro (USD$211.4 million) savings program, the third such program announced so far.

"You can't be 100 percent certain yet but if that (Lufthansa's new offer) doesn't do the trick, nothing will," said UniCredit analyst Katherina Kastenberger.

"I still think Lufthansa wants AUA, and if the first offer was weak it was to scare -- to pressure AUA into cutting more jobs, and to strengthen its hand against the EU."

The EU Commission said last week remedies Lufthansa had offered were insufficient to allay competition concerns. The German carrier is facing a self-imposed July 31 deadline for gaining clearance for the deal.

Lufthansa is burdened by weak demand as well as a number of acquisitions it agreed to last year, including Austrian Airlines, Brussels Airlines and British carrier bmi, racking up potential costs of close to EUR1 billion.

The company already pushed through a settlement with Sir Michael Bishop this year to lower the cost of its purchase of his 50 percent plus one share stake in bmi, and is now struggling to limit the costs of its AUA acquisition.

It has also detailed plans to cut its annual costs by EUR1 billion by 2011, cutting around 20 percent of the 2,000 administrative jobs in its passenger airlines business and possibly deferring some aircraft orders.

One of Lufthansa's main rivals, British Airways, is also under pressure to cut costs and on Friday unveiled plans to raise about USD$1 billion through a combination of bondholder debt and bank credit.