Lufthansa considering buying stake in Austrian Airlines

Monday, June 2, 2008, 16:41 by Aviation Correspondent

Deutsche Lufthansa AG, the flag carrier of Germany, is considering buying a stake in Austrian Airlines Group. Lufthansa, based in Cologne, Germany, is “closely observing events at its unprofitable Vienna Airport-based competitor and waiting for a signal from Austria’s government,” Financial Times Deutschland, a financial newspaper based in Hamburg, Germany, reported.

However, Lufthansa and Austrian Airlines are currently not in talks on the matter, the newspaper said.

“We generally look at all companies offered to us. It is too early to say anything, as the situation at Austrian Airlines remains unresolved,” Stefanie Stotz, a spokeswoman for Lufthansa, was quoted by Financial Times Deutschland as saying.

Austrian Airlines – the largest airline in Europe in terms of overall passengers carried and Europe’s second-biggest airline – has been negotiating with Saudi-Austrian businessman Sheikh Mohammed Bin Issa Al Jaber, whose lawyers have told the carrier that he wants to withdraw from buying a 20% stake, according to Financial Times Deutschland.

Shares of Austrian Airlines reportedly dropped by 5cents (1.8%) to 3.79 euros in Vienna trading, valuing the carrier at 324.7 million euros ($504.8 million). Lufthansa’s shares fell by 18 cents (1%) to 17.19 euros in German trading.

According to Financial Times Deutschland, stocks of Austrian Airlines have dropped by 39% in 2008. This downslide gained momentum in late April 2008 after Austrian Airlines suffered huge net losses in the first quarter on account of higher fuel costs and a cutback in long-haul routes.

The airline has offered a prospective buyer a network of eastern Europe routes from Vienna, Austria.

Al Jaber of Saudi Arabia had agreed to buy one-fifth of Austrian Airlines in March 2008 for 150 million euros in a transaction that would also include the sale of new stock in the carrier, according to Austrian media reports

Alfred Oetsch, chief executive officer of Austrian Airlines, was quoted as saying in a statement: “The company will continue its stand-alone strategy even if Al Jaber pulls out of the contract. In the event of Al Jaber deciding against an investment, Austrian Airlines will take appropriate measures to maintain its rights.”

Meanwhile, the website bloomberg.com has reported that though Austrian officials seem most inclined to team up with Emirates Airlines, based in Dubai, Lufthansa may also be interested in buying a stake in Austrian Airlines.

“Germany’s flag carrier,” the website says, “is closely observing developments at Austrian Airlines, which is not only much smaller than Lufthansa but has also been unprofitable for the last couple of years.”