Lufthansa has submitted a new proposal to European Union regulators in a bid to allay competition concerns surrounding its proposed takeover of Austrian Airlines.
EU watchdogs have previously rejected several proposals over fears that the German carrier will have a monopoly on routes between Vienna and other European cities.
The new offer follows a meeting between the EU competition commissioner Neelie Kroes and Lufthansa’s chief executive Wolfgang Mayrhuber last week. The commission is concerned that Lufthansa could gain a dominant position on routes into Austria from Germany and Switzerland, where it owns Swiss International Air Lines.
Timing of the approval is becoming increasingly important. A July 31 deadline for EU approval is a condition of Lufthansa’s earlier tender offer to Austrian’s shareholders. 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.
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 $711 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.