Austrian Airlines investment talks collapse

VIENNA, May 12 (Reuters) - Talks on a deal for investor Sheikh Mohamed Bin Issa al Jaber to take a major stake in Austrian Airlines (AUAV.VI: Quote, Profile, Research, Stock Buzz) have collapsed, state holding company OeIAG, the biggest shareholder, said on Monday.

A spokeswoman told Reuters talks had broken up over "conditions that were impossible to fulfil."

"It is largely to do with a demand for a larger stake at a lower price than agreed in the contract," she said, declining to give details.

In a deal announced in March, the Saudi-Austrian investor was to take a 20 percent stake in the airline via a capital increase at 7.10 euros per share, substantially higher than the current market value, for about 150 million euros ($230 million).

However, al Jaber threatened to pull out after the airline posted a first-quarter EBIT loss of 50.1 million euros in April, much worse than expected, sending the shares sliding.

Al Jaber wanted further shares at 4.20 euros, Austrian news agency APA said. Austrian Airlines had no comment on this report.

OeIAG has 42.75 percent of the airline.

The airline was saying as recently as Thursday that talks were continuing to save the deal. However, its chief executive said it could also consider working with a strategic partner.

He did not say who the airline might work with but some market players have mentioned Lufthansa (LHAG.DE: Quote, Profile, Research, Stock Buzz) and Emirates [EMAIR.UL].

Shares of Austrian Airlines closed at 4.18 euros on Friday. Monday was a market holiday in Austria. (Reporting by Alexandra Schwarz; Writing by Paul Bolding; Editing by Braden Reddall)