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* Asks Austrian takeover body to extend deadline to Aug. 31
* Needs more time to come to agreement with EU Commission
* Takeover Commission to decide on extension this week
* AUA shares rise on deal hopes; Lufthansa flat
(Adds Commission, shares, analyst, source)
By Maria Sheahan and Sylvia Westall
FRANKFURT/VIENNA, July 28 (Reuters) - Deutsche Lufthansa (LHAG.DE) has asked the Austrian Takeover Commission to extend the deadline to complete its deal on buying Austrian Airlines (AUA) AUAV.VI as it scrambles to address EU antitrust concerns.
The German flagship carrier said on Tuesday it was nearing an agreement with the European Commission -- whose approval is required for the deal -- but would not be able to get formal approval of the acquisition by its self-imposed July 31 deadline.
Lufthansa said it had asked the Austrian Takeover Commission to extend the Aug. 31 to give it and the European Commission more time to reach agreement, after a weeks-long standoff over EU concerns that combining the airlines would affect fair competition.
The Austrian Takeover Commission said it would decide this week whether the deadline could be extended.
Both Lufthansa and Austrian Airlines declined to comment.
Austrian Airlines shares were 6.9 percent higher at 4.35 euros by 1120 GMT, buoyed by hopes that the long-running takeover process might finally be worked out. Lufthansa was 0.1 percent higher at 9.525.
"This (extension seeking) takes a little bit of the pressure out of the negotiations," said UniCredit analyst Katherina Kastenberger, adding that she thought there was now a stronger possibility of a deal being secured.
"It shows Lufthansa is still interested in AUA," she said.
At the end of last year, Lufthansa agreed to buy loss-making AUA, but said at the time that it wanted all of its conditions to be approved by the end of July, giving it an escape route if it the deal became too difficult or expensive.
Lufthansa has submitted new proposals intended to tackle antitrust concerns, the European Commission said, adding that it planned to market-test the new offer.
Lufthansa previous had agreed to concessions to allay the Commission's concerns -- after AUA approved a third cost-cutting programme to slim down ahead of the buy -- but there has been no approval for the deal.
The whole process has dragged on for nearly a year.
AUA lost 429 million euros ($612.5 million) in 2008 and has piled up more than 1 billion euro in debt, or more than five times its equity. It only survived the past months due to a 200 million euro lifeline by the Austrian government.
A source close to the deal said parties involved could come to an informal agreement this week.
"It has become more likely that there will be an informal agreement, a handshake (on conditions), but without anything written down or going through the bureaucratic measures," the person said.
The source also confirmed a report in Austrian daily Kurier that said Lufthansa was ready to give up some key takeoff and landing slots in Vienna to competitors to defuse monopoly concerns at the Commission.
Kurier reported that Lufthansa was prepared to yield six of 10 slots between Vienna and Frankfurt to other carriers like Austrian low-fare airline Niki and Slovenia's Adria Airways.
Peter Michaelis, head of Austrian holding company OeIAG, said he hoped talks were down to formalities.
"When all parties want it, we can do it and I still think the chances are very good that this deal will be sealed," he told Austrian radio.
He said the airlines had made "economically sensible" decisions related to route rights and timetables to ease talks.
"The details of remedies of Lufthansa's offer are the key to evaluate the attractiveness of the deal," said Equinet analyst Jochen Rothenbacher, adding he expected Lufthansa to use its strong negotiating position to get a good deal.
Analysts have said that while Lufthansa sees only 80 million euros of potential synergies from the deal, it will pay off in the long run as it gives access to growth regions in eastern Europe such as Krasnodar, southwestern Russia; Kosice, Slovakia; and Odessa, Ukraine. ($1=.7004 Euro) (Additional reporting by Foo Yun Chee in Brussels; editing by Karen Foster)