Lufthansa acquires debt-ridden Austrian Airlines

German flag carrier Lufthansa has become Europe's biggest airline after the Austrian government sold its 41.65 per cent stake in the debt-ridden Austrian Airlines for €366,000, with a provision for paying an additional €162 million in 2011 subject to certain conditions.

The acceptance of the Lufthansa bid is the result of a bidding process launched in the early part of 2008 in accordance with EU privatisation guidelines. The process was structured and carried out by ÖIAG and investment bank Merrill Lynch and the deal is subject to conditions, including antitrust approval, and the European Commission ruling on the payment of the airlines €500 million debt as part of the takeover process.

The second part of the payment for the 41.65 per cent government stake depends on Austrian Airlines meeting the targets and performance as envisaged in the merger plans.

Lufthansa chief executive, Wolfgang Mayrhuber told a news conference in Vienna that "the risk of the commission turning down the restructuring aid is about zero" and added that the final closing of the deal will take place in May 2009.

Austrian Airlines will remain a broadly independent airline with its head office in Austria, its own brand, fleet and crew, and will be managed as a profit centre in the Lufthansa Group.

Lufthansa has agreed to maintain Austrian air traffic infrastructure to the "greatest possible extent", taking into consideration the needs of Vienna as a business location, as well as continuing to expand this wherever commercially viable in line with the needs of the market.