Q+A-How will Lufthansa's AUA takeover work?

VIENNA, Dec 3 (Reuters) - German airline Lufthansa (LHAG.DE) is due to complete the purchase of loss-making Austrian Airlines (AUAV.VI) from Austrian state holding company OeIAG on Friday.

Following are answers to questions about the deal:

Q: WHAT IS LUFTHANSA BUYING?

- Austrian government holding company OeIAG is expected to sell its 42-percent share for a nominal amount of 0.01 euro per share, or around 370,000 euros ($466,500). In addition, the Austrian government itself or via OeIAG will assume 500 million euros of AUA's debt, about half the total.

- Lufthansa is expected to make the 48-percent free float shareholders an offer upon closing the deal. It is expected to offer the average share price over the preceding six months, currently just over 4 euros a share, or around 170 million euros in total.

- Two Austrian banks, an insurer, and AUA itself own the remaining 10 percent of the shares. The banks and the insurer are likely to sell to Lufthansa at the same terms as the free float. They are expected to make a decision next week.

Q: HOW LONG UNTIL CLOSING, WHAT COULD STILL GO WRONG?

- The European Commission -- the European Union's executive body -- has to ensure the deal does not harm competition in the airline sector and must approve the government's 500 million euro debt plan. The process will last well into 2009.

- Other bidders for AUA which dropped out of the tender may sue OeIAG. Air France-KLM (AIRF.PA) is considering legal action because it says the tender's original terms did not include the possibility of debt reduction and the auction should have been started from scratch when this became an option.

Q: WHO WILL BE THE "AUSTRIAN KEY SHAREHOLDER"?

- The tender terms said that an "Austrian key shareholder" should own 25 percent of AUA after the deal. But attempts to win private investors did not yield a solution, and Lufthansa has made clear it is aiming for 100 percent ownership.

- According to sources close to the process, the plan is to install a trust that owns 25 percent, which would be controlled by a board of Austrians and independent from Lufthansa, but of which Lufthansa is the main economic beneficiary.

Q: WHAT DOES THIS MEAN FOR VIENNA AIRPORT?

- There were fears in Austria that Lufthansa may redirect AUA flights from Vienna airport (VIEV.VI) to its hubs in Frankfurt, Munich and Zurich. Analysts point out that Lufthansa's hubs are already close to capacity and Vienna is well located to serve emerging Europe and the Middle East.

Q: WHAT ELSE IS LUFTHANSA EYING CURRENTLY?

- Lufthansa is a major buyer among ailing regional European airlines, trying to strengthen its grip as the industry is in crisis due to the global economic downturn.

- It has cast an eye on Britain's bmi [BMID.UL], Brussels Airlines, and Lufthansa partner Eurowings, and is still interested in a minority stake in Alitalia AZPIa.MI.

(Reporting by Boris Groendahl, Alexandra Schwarz and Angelika Gruber in Frankfurt; Editing by David Cowell)