EC talks continue after meeting
The European Commission (EC) has said talks will continue with Lufthansa over its takeover of Austrian Airlines.
Lufthansa's ceo Wolfgang Mayrhuber and the EC's competition commissioner Neelie Kroes failed to agree terms last night after the two met to discuss the deal.
The invitation to meet came from Ms Kroes late last week after Lufthansa submitted a second raft of concessions.
Lufthansa is understood to have made further concessions on routes in and out of Vienna in an attempt to allay EC competition concerns.
But the EC has not yet indicated whether the new concessions are enough to gain approval by the end of July.
Under the terms of the deal, Lufthansa is able to walk away before the end of July giving the deal a self-imposed deadline.
Last week Lufthansa said it had made all the concessions it could without making the acquisition "uneconomical". It said any deal had to be fair to Lufthansa and its shareholders.
Lufthansa refused to comment on reports its latest concessions came only after Austrian struck another cost cutting deal with its trade unions.
Lufthansa told ABTN it did not want to walk away from talks if EC regulators fail to reach a "quick" decision by the end of July.
Austrian Airlines this week warned that it would need a €1bn cash boost should the deal with Lufthansa fall through, twice the €500m grant promised by the Austrian Government.
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.
An earlier "informal" package of concessions submitted by Lufthansa was quickly rejected by the EC which said the deal had not improved.
The EC 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.
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.
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."
Last week Lufthansa announced plans to cut costs by €1bn by 2011 including a 20% workforce reduction.
There was no indication whether this cost cutting would affect its takeover plans for either Austrian or British carrier bmi.
www.austrian.com www.lufthansa.com http://ec.europa.eu/index_en.htm