Russia's S7 says AUA partnership "win-win" deal

VIENNA, Sept 9 (Reuters) - The head of Russia's No. 2 airline S7 Airline said on Tuesday a partnership with Austrian Airlines AUAV.VI, which is seeking a buyer for a major stake, would allow both carriers to generate new business.

S7 Chief Executive Vladislav Filev stopped short of repeating earlier statements saying he would bid for a stake put up for sale by Austria's government holding company OeIAG, which has gagged bidders with confidentiality agreements.

But he made clear his view that a deal with S7 would mean potential for expansion at Austrian, rather than the downsizing analysts expect to follow a possible takeover by contenders such as Germany's Lufthansa (LHAG.DE) or Air France-KLM (AIRF.PA).

Air France-KLM said on Tuesday it would bid for a stake.

"A partnership with AUA can become a 'win-win' situation for both companies," Filev told a news conference in Vienna. "We can help each other to generate new business."

Unlike Russia's biggest airline, Aeroflot (AFLT.MM), which S7 believes will also file a bid for Austrian, S7 does not have a network of foreign destinations, and Vienna -- Austrian's main hub -- was well situated between Russia and Europe, he said.

S7's plan was to bring Russian passengers to Vienna and connect them to European and American destinations via Austrian, Filev said. He added that he expected passenger volume of around 3 million by 2012 for this business.

S7 transports 5.7 million passenger a year mainly on domestic flights and expects to generate $1.8 billion in revenues this year.

Apart from S7, Lufthansa, Air France-KLM and Aeroflot, Air China (601111.SS), British Airways BAY.L and Turkish Airlines THYAI.IS have also filed their interest in Austrian with Merrill Lynch, the adviser handling the sale, according to media reports.

OeIAG is offering its 43-percent stake in Austrian, but may sell less than that because the deal is tied to the condition that an Austrian core shareholder group must retain 25 percent of the carrier. (Reporting by Alexandra Schwarz, writing by Boris Groendahl; Editing by Paul Bolding)