Lufthansa has officially taken over the Austrian Airlines Group (AUA) and said it plans to make the troubled airline “cash positive” by next year. The deal makes the Lufthansa group Europe's largest carrier.
Germany's largest is now Europe's largest air carrier
Officials from both airlines met at Vienna's international airport on Thursday to finalize the deal, which brings an end to more than a year of negotiations. The merger faced both fierce opposition from rival airlines and anti-trust scrutiny from the European Union.
The European Commission gave its approval to the bid last week, which cleared all hurdles for the takeover. To get that approval, however, Lufthansa had to agree to a number of conditions, including cutting some flights between Vienna and certain destinations in Germany and Belgium.
Long term investment
Lufthansa agreed to buy 42 percent of AUA for a total of 366,000 euros ($532,000), and also to buy out the remaining shareholders at 4.46 euros per share. In total, the acquisition will cost Lufthansa around 220 million euros.
Mayrhruber is confident Lufthansa can benefit from the struggling AUA
Lufthansa CEO Wolfgang Mayrhuber, himself an Austrian, said the takeover of Austrian Airlines was a long term decision.
"This isn't a project for just one or two years. We're currently burning money; we're cash negative. But we'll be cash positive next year. Then the aim will be to return to the black at an operating level as quickly as possible," he said.
In exchange for the takeover, the Austrian government has promised to absorb around 500 million euros, or a third of AUA's massive debts.
Lufthansa to gain from AUA's Eastern European flights
One of the main reasons why Lufthansa decided to buy its rival was its focus on eastern Europe, as well as on the Middle East.
At present, Austrian Airlines has the most flights in central and eastern Europe. With its fleet of 91 aircraft, it transported a total of 10.7 million passengers in 2008.
After acquiring these routes, Lufthansa is set to become Europe's number one airline, surpassing Air France-KLM.
As part of the takeover, however, Austrian Airlines will be subject to harsh savings measures, including cutting staff by more than 10 percent.
Nonetheless, AUA chief executive Peter Malanik stressed that the takeover was a win-win situation - not only for his company and its customers, but also for the Austrian economy.
Editor: Chuck Penfold