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Lufthansa to Take Over Austrian Airlines?July 21, 2009 By: Jena Tesse Fox
Lufthansa’s take-over of Austrian Airlines is undecided after chief executive Wolfgang Mayrhuber met with Europe’s top competition regulator last night to discuss the new concessions proposed by the German carrier.
The new terms were made to address the regulator’s fears about the lack of competition which would exist on routes between Vienna and a number of European cities should the take-over proceed.
Last Friday, European competition regulators gave a cautious reaction to the latest proposal from Lufthansa, meaning that completion of the deal remains uncertain. The EU competition commissioner Neelie Kroes subsequently invited the Lufthansa head to meet to discuss the new terms.
EU officials said that they still needed further clarifications and remained tight-lipped as to whether the most recent proposals were sufficient. The approval process has been bogged down for several weeks over the number of routes which Lufthansa should give up in Vienna, with Lufthansa insisting it could not relinquish the amount the EU wanted for fear of making the deal uneconomical.
But last week, people close to the talks said Lufthansa had managed to secure additional cost-savings from Austrian’s unions, making further concessions to Brussels financially viable for the first time.
Lufthansa’s main European rival, Air France-KLM, has been highly critical of the deal with Lufthansa, as it involves state aid of $710.75 million, which halves Austrian’s debt.
But the issue at stake now is market share, with the commission worried that Lufthansa could gain a dominant position on routes into Austria from Germany and Switzerland, where it owns Swiss.