Concrete deal needed "within hours" says EC
The European Commission (EC) today (July 10) rejected concessions offered by Lufthansa to try and speed up approval of its takeover of Austrian Airlines.
It told the German carrier that it must come back with "concrete concessions" by the end of the day if approval were to be speeded up.
A Lufthansa spokesman confirmed that a new "informal" offer had been sent to EC competition regulators and that it wanted an early decision.
But the EC said today's offer was not enough for it to bring its decision forward to the end of the month.
Unless Lufthansa improved the offer, a decision would not be made until early November.
"We have received an informal offer. Unfortunately, this was worse than what was previously on the table," EC spokesman Jonathan Todd said.
A Lufthansa spokesman was unable to confirm the nature of the concessions. But the EC indicated that some compromises on proposed routes had been offered.
Mr Todd said he regretted that Lufthansa had taken "one step forward and two back" with its latest package.
A spokesman for the airline said: "The Commission made the statement that they could not rule anything before the July 31. If that's their final decision, I'm not sure, there's still 21 days to go.
"We don't know if they want to close the door now. That's the Commission's decision."
The EC this month began a second investigation into the takeover, citing concerns that competition could be reduced on routes between Vienna other European cities.
The EC last week said that if Lufthansa came up with "satisfactory remedies (to concerns over competition on several routes) within the next few days," the merger could go ahead.
Mr Todd at the time said that if no acceptable plans were put forward by the German carrier, the investigation would not report until November 6.
Under the terms of the proposed takeover, Lufthansa can walk away if the deal is not signed by July 31.
Austrian Airlines recently announced it was cutting around 1,000 jobs by mid-2010 to help make savings of €200m by 2012.
Austrian admitted that cuts had been made this year in the hope that the EC would approve its merger with Lufthansa.
Under the proposed deal Lufthansa agreed to pay the Austrian government €366,268 for its 41.6% stake in its national airline.
The second part of the agreement was that the Austrian state received a "debtor warrant" from Lufthansa which might lead to additional payments.
The last element was that the Austrian government paid Lufthansa €500m for a "capital increase" in Austrian Airlines.
Lufthansa's share offer for Austrian was approved last month by 85% of the shareholders, above the 75% threshold needed under the takeover terms.
The Commission said it was still considering "state support for Austrian Airlines in the framework of a separate investigation under EC Treaty state aid rules."
The EC said its initial investigation, which started in February, "indicated that the proposed acquisition could, on certain routes, give rise to reduced choice of airline services for passengers and the likelihood of higher fares."
It added: "There are therefore serious doubts as to the proposed takeover's compatibility with the Single Market in the absence of appropriate remedies."
Neelie Kroes, the EC's competition commissioner, said: "It is essential that airline consolidation does not deprive consumers of a choice of airlines, competitive prices and other benefits of liberalisation of air transport in the EU.
"I hope that, in a spirit of mutual cooperation, we will be able to work closely with Lufthansa in the coming weeks to find timely solutions to these concerns."
Lufthansa said the decision to extend the probe was "surprising" but both it and Austrian said they were confident the deal would go through.
www.austrian.com www.lufthansa.com http://ec.europa.eu/index_en.htm