Austrian government puts off sale of stake in Austrian Airlines till December 31

The government of Austria has put off sale of a stake in Austrian Airlines, the flag-carrier airline of Austria, to December 31, 2008.

The government’s mandate for OeIAG, the state holding company, to sell its 41.6% stake in Austrian Airlines was due to expire on October 28, 2008.

Also, the mandate allows OeIAG to sell its entire holding on condition that an Austrian key shareholder keeps a 25% stake, that Austrian Airlines’ headquarters and its main hub remain in Vienna, and that its brand is preserved and jobs secured as far as possible.

At present, Lufthansa, the flag carrier of Germany, is the only bidder for the heavily losing and hugely indebted Austrian Airlines.

The Austrian news agency APA quoted Austrian government sources as saying that the government was willing to take over 500 million euros ($618 million) of Austrian Airlines’ debt – one of the demands made by Lufthansa.

Media reports said that Lufthansa is offering only a nominal price for OeIAG’s 41.6% stake – merely 0.01 euro per share or 360,000 euros ($445,200) in all. In addition, Lufthansa reportedly wants the Austria government to assume about 500 million euros of Austrian Airlines’ total debt of about 900 million euros.

Austrian Airlines AG, headquartered in Vienna, together with regional subsidiary Tyrolean Airways (Austrian Arrows) and charter arm Lauda Air, operates scheduled services to over 130 destinations. Its main base is Vienna International Airport, with a hub at Innsbruck Airport. The airline is a member of the Star Alliance and the Austrian Airlines Group.

A spokesman for Austria’s Finance Ministry was quoted by the media as saying: “The Finance Ministry approved the extension of the mandate under certain conditions to give OeIAG time for more talks. The condition is that the privatisation mandate remains unchanged and that Lufthansa’s offer remains on the table.”

Postponement of the sale of Austrian Airlines has also enabled Russian airline S7 to return to the race to bid for the Austrian flag carrier alongside rival bidder Lufthansa.

S7 Airlines, based in Moscow, Russia, is currently the largest and fastest-growing airline of Russia, having improved its lead recently over Aeroflot as Russia’s leading domestic airline. S7 operates scheduled passenger flights to destinations in Russia and the CIS member-countries as well as international services to Austria, Bulgaria, China, Egypt, Germany, Ireland, Israel, Montenegro, South Korea, Spain, Thailand, Turkey and the United Arab Emirates.

However, Air France-KLM, headquartered at Roissy-Charles de Gaulle Airport near Paris, France, is not now a bidder for Austrian Airlines, Peter Michaelis, chief of OeIAG, said in a television interview.  Earlier, Air France-KLM had been seen as a possible suitor for Austrian Airlines.

Meanwhile, Austrian Airlines said in a statement that the carrier suffered a net loss in the third quarter of 2008, compared to a net profit in the same period in 2007, on account of “the global financial crisis hurt ticket sales.”

Austria’s flag carrier posted a net loss of 16.4 million euros ($20.5 million) for the three months ended September 30, 2008, compared to a profit of 20.6 million euros ($25.8 million) in the third quarter of 2007.