3rd UPDATE: EU: Prospects Of Lufthansa/Austrian Deal Fading
July 10 2009 - 1:11PM
Dow Jones News
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)