Lufthansa completes takeover of Austrian Airlines (Roundup)

Sep 3, 2009, 11:43 GMT

Frankfurt/Vienna - German air carrier Deutsche Lufthansa AG completed the takeover of Austrian Airlines AG Thursday by signing final contracts in Schwechat near Vienna.

The Lufthansa group is now Europe's biggest carrier, surpassing French-Dutch airline AirFrance-KLM in terms of passenger numbers.

Europe must seek to stay competitive as a region, Lufthansa chief executive Wolfgang Mayrhuber said. 'That doesn't work in a fragmented environment. It works only if we can achieve a reasonable competition structure through consolidation,' he said at a press conference.

The ailing Vienna-based flag carrier is to retain its brand and network of destinations, as was the case when Swiss, British Midland and Brussels Airlines joined the Lufthansa group.

Austrian Airlines chief executive Peter Malanik stressed that the takeover was a win-win situation not only for his company, its customers and its supplier, but also for Austria's economy.

'Austria stands to profit as an economic hub, because the network of destinations in Central and Eastern Europe that is so important for Austria's economy can be preserved and expanded,' he said.

The airline's focus on Eastern Europe, as well as on the Middle East, was one of the reasons why Lufthansa decided to buy its smaller rival for a maximum of 382 million euros (544 million dollars), the final price depending on future business development.

In its business with Germany and Belgium, the Lufthansa group was forced to cut some flights between Vienna and destinations in Germany and Belgium, in order to get approval by the European Commission.

The Commission approved the Vienna government's state aid, which was part of the deal, but mandated that Austrian Airlines is not allowed to expand before it starts making a profit.

'We want to be cash-positive next year,' Mayrhuber said of the newly acquired loss-making company, 'we want to take in more money than we spend.'

As part of the takeover, Austrian Airline's staff are subject to tough savings measures, including the cutting of 1,000 full-time positions from a staff of 8,000 through the middle of next year.

The closing documents were signed by the chief executives of Lufthansa, Austrian Airlines and Austria's state holding OeIAG, which sold its 42-per cent stake.

Lufthansa also acquired shares held by private and corporate investors and now owns 90 per cent of Austrian Airline's stock.