German flag carrier Deutsche Lufthansa AG's (LHA.XE) chances to take over troubled Austrian Airlines (AUA.VI) are fading fast, after a European Commission spokesman said Friday it is unlikely to receive antitrust clearance before a crucial end of July deadline.

Lufthansa's takeover bid of EUR4.49 a share would keep the ailing Austrian Airlines from failing, and sustain the bigger carrier's buying spree. But the deal hinges on approval from the commission - which is concerned that the combined airline would have too big a share of the business on some key European routes,mostly departing from Vienna.

The airline submitted an informal proposal of antitrust remedies to the commission Friday to speed the approval process, but failed to adequately address the commission's concerns, said Jonathan Todd, the commission spokesman for competition issues.

"Regrettably, these revised remedies are worse than what was offered before," said Todd.

Lufthansa has said that competition-commission clearance by the end of July would be paramount for the deal.

But, chances of a rapid clearance for the Lufthansa takeover of Austrian Airlines are disappearing, Todd said. The commission won't be in a position to make a decision by the end of the month "unless there is a miracle," he added. "It's very difficult to understand why they are adopting this approach if they genuinely want a rapid decision from the commission," Todd said.

If the offer were to fall through, it wouldn't necessarily be bad news for Lufthansa, said Merck Finck analyst Robert Heberger. The deal might offer more risks than opportunities in the current environment, in particular if Lufthansa has to make additional concessions, Heberger added.

Lufthansa said it could only make concessions on some of the European Commission's concerns, but not all. A spokeswoman said Lufthansa had made far-reaching concessions to the EU years back when it formed a cooperation with AUA.

An Austrian government spokesman said all parties are working toward a compromise.

"We are in constant contact with both Lufthansa and the European Commission, and we are convinced that they are both working hard to reach a solution," said Daniel Kapp, spokesman for Austrian Finance Minister Josef Proell. "It is our clear impression that both sides are working towards a compromise."

Kapp also said that it was not the Austrian impression that Lufthansa was looking for a way out. "We believe Lufthansa will keep its word," Kapp said.

Should the sale fail, Austrian Airlines could eventually have to file for insolvency, which could result in the emergence of a severely downsized carrier.

Austrian Airlines reported a net loss of EUR429.5 million in 2008, and another of EUR88.1 million in the first quarter of 2009. It has received a EUR200 million bridge loan from the Austrian state to help keep it afloat until the closing of the sale.

Austrian Airlines Chief Executive Andreas Bierwirth has previously estimated that the airline will need to shed half of its roughly 100 aircraft to regain profitability without Lufthansa.

Peter Michaelis, head of state holding company and AUA controlling shareholder OeIAG, said: "What would be left wouldn't be an Austrian Airlines. It would rather be Vienna Airlines."

-By Peppi Kiviniemi, Dow Jones Newswires; +3227411483; peppi.kiviniemi@dowjones.com

(Flemming Hansen in Vienna, and Erin Fines in Frankfurt contributed to this article)