Lufthansa Says It Will Acquire Austrian Airlines

Lufthansa said its supervisory board had approved a deal to acquire Austrian Airlines AG, giving one of Europe's biggest airlines more routes across the continent and beyond. The Cologne-based Lufthansa said its board agreed to acquire the 41.6% stake held by Austria's privatization agency, or OeIAG, for euro366,000 ($463,000) and, pending the Austrian airline's performance, pay another euro162 M. The deal is subject to regulatory approval along with OeIAG's supervisory board, which is to meet. Also key to the deal is approval by the EU that euro500 million in restructuring aid floated by Austria's government be approved, one of the conditions that Lufthansa set in October to ensure that Austrian's debt would be assumed by the state. Shares of Lufthansa were down slightly by 0.1% to euro10.32 in Frankfurt. Austria's government decided in August to sell off its share in the ailing flagship carrier, which is steeped in euro900 million of debt. Austrian posted a net loss of euro16.4 million for the three months that ended Sept. 30, compared with a profit of euro20.6 million a year earlier. Lufthansa's 3rd-Q profit in the July-Sept. period slumped to euro149 million from euro586 million a year earlier, depressed by high fuel costs. It also cut full-year earnings outlook, citing the economic uncertainty. Still, despite the crisis facing the European airline industry over what were volatile fuel prices and falling passenger numbers, Lufthansa has been on an acquisitions tear. In October, Deutsche Lufthansa AG locked up valuable takeoff and landing slots at Heathrow Airport with its decision to increase its stake in British Midlands to 80% after it agreed to pay BMI's main shareholder euro400 million for his 50% stake. The remaining 20% of BMI is owned by Scandinavian airline SAS. In September, Lufthansa acquired a 45-percent equity stake in Brussels Airlines with an option to buy the rest in 2011. Lufthansa said it sees Brussels operating largely as an independent company in Lufthansa's group. That's largely the way Lufthansa has handled its acquisition of Swiss International Air Lines, which it announced in 2005. In late 2007, Lufthansa announced it would buy a 19% stake in American carrier JetBlue Airways, giving it access to more North American business.