European Commission gives final approval to Lufthansa to take over Austrian Airlines

The European Commission (EC) has given its final approval to Lufthansa, the flag-carrier airline of Germany, to take over Austrian Airlines, the national airline of Austria.

Austrian Airlines logo

Lufthansa said in a statement that the loss-making Austrian Airlines will be “integrated into the Lufthansa Group” in September 2009.

Austrian Airlines, the biggest carrier in Austria, has two subsidiaries – Tyrolean Airways and Lauda Air.

Lufthansa and Austrian Airlines are both members of the Star Alliance.

The approval was given by the European Commission, the regulator of the European Union, after Lufthansa agreed to let competitors operate on 5 routes – from Vienna, the capital of Austria, to Frankfurt, Cologne, Munich, Stuttgart and Brussels.

In July 2009, the European Commission had given its provisional sanction to the Lufthansa-Austrian Airlines deal on condition that Lufthansa should take measures to minimise the concerns over the possible merger.

On its part, Lufthansa has promised the European Commission that it will take steps to alleviate concerns that the deal could leave the passengers with lesser choice and higher fares on the 5 routes originating from Vienna.

In the statement, Lufthansa said it had accepted all the conditions set by the European Commission in order to finalise the deal that would make Lufthansa the “uncontested leader in the airline sector in Europe.”

Peter Malanik and Andreas Bierwirth, co-chairmen of Austrian Airlines, said in a press release that Austrian Airlines would cut management posts by about half as a part of the restructuring process.

The deal with Lufthansa, Malanik and Bierwirth, added, is a “big chance” for Austrian Airlines to improve its all-round performance.

In accordance with the European Commission’s conditions for approval of the deal, Austrian Airlines will have to reduce capacity 15%, from its level of January 2008, by the close of 2010. From then on, a statement from the European Commission explained, Austrian Airlines’ growth will be capped at the average of the rate of other Europe-based airlines till the end of 2015 – or, until Austrian Airlines achieves operational break-even, whichever comes first.

According to media reports, Lufthansa had consented to relinquish 19 takeoff and landing slots in Vienna with a view to encouraging competition and thus get the much-needed final green signal from the European Commission.

In 2008, Lufthansa had signed an agreement to buy Austrian Airlines from OeIAG, Austria’s state-owned holding company, for a symbolic 1 euro cent a share – which comes to a total of just over 366,000 euros ($518,000).

The government of Austria had promised to absorb 500 million euros out of Austrian Airlines’ debts ( which is about a third of the airline’s total debts) in order to facilitate the takeover by Lufthansa.