Lufthansa offers $475 million to buy troubled Austrian Airlines

Deutsche Lufthansa AG, the flag carrier of Germany, has offered to take over the loss-making rival Austrian Airlines, the flag-carrier airline of Austria, and pay up to 377 million euros ($475 million) to take full control.

If the takeover bid by Lufthansa, the largest airline in Europe in terms of overall passengers carried, materialises, it would be one of the most ambitious airline acquisitions the global aviation industry has seen in years, according to aviation experts.

Deutsche Lufthansa said in a satment that it expected the Austrian state holding company OeIAG to agree to sell off its 41.56% stake in Austrian Airlines for 366,000 euros – which is a nominal 1 euro cent per share.

All other shareholders in Austrian Airlines will be offered 4.44 euros per share, amounting to another 215 million euros.

The final payment could reach up to 162 million euros, depending on future performance, Lufthansa said.

The statement from Lufthansa stressed that the acquisition of the Austrian government’s stake in Austrian Airlines “is dependent on several things, notably that the Austrian government takes on some 500 million euros of Austrian Airlines’ debt of more than 1 billion euros. This action, as well as the Lufthansa takeover, are subject to oversight by the European Commission and must be approved for the deal to proceed.”

The acquisition of the stake from OeIAG was also contingent on Deutsche Lufthansa holding more than 75% of the shares in Austrian Airlines after the initial acceptance period for the public offer.

Deutsche Lufthansa is the world’s fifth largest airline in terms of overall passengers carried. It has the sixth-largest passenger airline fleet in the world, when combined with Lufthansa CityLine, Air Dolomiti, Eurowings, Germanwings, Augsburg Airways, Contact Air, and SWISS. Lufthansa’s corporate headquarters is in Cologne, Germany, and its main base and primary traffic hub is at Frankfurt International Airport in Frankfurt, with a second hub at Munich International Airport.

Peter Michaelis, head of the Austrian state holding company OeIAG, said in a statement: “The partnership with Lufthansa guarantees not only the continuation of the brand and employment at Austrian Airlines but also assures long-term access to vital international passengers.”

Initially, Deutsche Lufthansa had to face competition for the Austrian government-owned stake in Austrian Airlines from Russia’s S7 airline and Air France-KLM, which had expressed an interest in the airline.

However, OeIAG announced in November 2008 that it would negotiate exclusively with Deutsche Lufthansa to sell the stake.

Meanwhile, Austrian Airlines has forecast that it will make a full-year loss of 100 million euros to 125 million euros in 2008, adding that “special items” could bring the figure up to 475 million euros.