Air France may challenge Austrian Air sale -paper

FRANKFURT, Nov 21 (Reuters) - Air France-KLM (AIRF.PA) is considering legal steps against the Austrian state holding company's planned process for the sale of Austrian Airlines (AUAV.VI), Financial Times Deutschland reported on Friday. "We are thinking about taking legal steps against the sale process, in which the rules of the game were changed after the fact," the newspaper cited the French carrier's designated Chief Executive Pierre-Henri Gourgeon as saying.

The Austrian government last month responded to pressure from Germany's Lufthansa AG (LHAG.DE) -- the only bidder remaining for Austrian Airlines -- to take on around half the latter's 900 million euro ($1.1 billion) debt pile.

State holding company OeIAG is in exclusive talks with Lufthansa, after Air France-KLM last month dropped out of the race and a bid from Russia's S7 failed to comply with the rules of the tender.

Gourgeon, who will be at the helm of Air France from Jan. 1, said OeIAG had made demands on Air France which it later dropped for Lufthansa.

Commenting on a possible tie-up with Alitalia SpA AZPIa.MI, Gourgeon said there would be "healthy competition" in the northern Italian market if Air France won the bid for the carrier and Lufthansa continued expanding its own operations out of Milan's Malpensa airport. (Reporting by Maria Sheahan; Editing by David Holmes)