Austrian Airlines for Sale

By Thomas Stocker

August 21, 2008
Air Transport and Cargo

The Austrian government has decided to sell its share of Austrian Airlines and has published advertisements in the financial press offering its 42.75-percent share of the flag carrier. The government has attached a number of conditions to the sale, including an obligation to maintain Vienna as a hub, to maintain the name Austrian Airlines and to leave a minority share of 25 percent of the total stock capital in Austrian hands.

Apart from the government’s participation through state-owned investment agency OIAG, national institutional investors hold 10.2 percent of Austrian Airlines; floating stock constitutes the remainder. The Austrian Group fully owns the regional subsidiary Austrian Arrows and holiday charter line Lauda Air, as well as a 22.5-percent share in Ukraine International Airlines. The group operates a fleet of just over 100 airliners.

Austrian announced a loss of nearly €50 million ($74 million) for the first half of this year and expects another loss of €70 million ($103 million) to €90 million ($133 million) for the second half. Analyzing a situation marked by an economic slowdown paired with soaring fuel prices, the board of directors concluded that the airline either needs a strong partner or would have to re-duce the scope of its operations, mainly in the long-haul sector. “The preferred solution is a merger with a strong airline partner,” said CEO Alfred Oetsch.

OIAG has charged investment banker Merrill Lynch with finding a suitable partner. The majority of the board members would reportedly prefer a partnership with Lufthansa. The acquisition of Austrian would allow the German carrier, together with its Swiss subsidiary, to become the leading airline in a territory of 110 million inhabitants, with major hubs in Frankfurt, Munich, Zurich and Vienna. However, Lufthansa has in the past shown reluctance to bail out ailing airlines, unless a return to profit seemed possible within a short period. Other reportedly interested potential partners include Air France-KLM and more exotic candidates such as Aeroflot and Turkish Airlines.

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