ATW Daily News

EC extends Austrian/Lufthansa investigation; focus is on concessions

Thursday July 2, 2009

The European Commission extended the deadline of its investigation into the takeover of Austrian Airlines Group by Lufthansa by at least 14 days, or up to a maximum 90 days although a decision is expected to come in about two weeks.

Sources close to both AAG and the Austrian government told ATWOnline that a 20% reduction in Austrian's capacity may be a condition for approval and would be acceptable. The airline is considered to be too large for its home market, with or without Lufthansa.

"If we have to deliver the bad news regarding a shrinking network, fleet and employees, it is [more comfortable for us] if it is announced by the EU and then we can blame the EU. It reveals the cowardice of the politicians and, especially, the unions within AAG that never allowed a staff reduction, which had been necessary," an AAG management source told this website.

Other conditions likely will involve the surrender of slots on the carrier's most profitable routes, such as Vienna-Geneva, VIE-Frankfurt and flights to some Eastern European destinations. Its charter business, operated largely by its Lauda Air subsidiary, also could be cut by half.

AAG employs more than 7,900. Some 2,600 already are on short-time work, and it is expected that up to 1,000 will be laid off if and when the carrier shrinks. By comparison, Air Berlin employs 7,800 and transports around three times as many passengers (30 million to 10 million).

Lufthansa's acquisition of AAG, and the €500 million ($704.3 million) in state aid that is part of the deal, require European antitrust approval (ATWOnline, July 1).

by Kurt Hofmann

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