June 28, 2009 / 10:35 PM / 10 years ago

EU may delay Austrian Air takeover decision-paper

VIENNA, June 28 (Reuters) - The European Commission will not rubber-stamp German airline Lufthansa’s (LHAG.DE) takeover of Austrian Airlines AUAV.VI this week, a delay that could derail the deal, an Austrian newspaper reported on Sunday.

Der Standard reported on its website that the European Union’s executive body will postpone by two weeks a decision on the deal that had been due this Wednesday, and may even start a detailed probe which could delay the transaction further.

Der Standard quoted sources close to the European Commission for its information but said Commission officials declined to comment.

Lufthansa agreed in December to buy state-controlled Austrian Airlines (AUA) in a deal that also includes 500 million euros ($703 million) in state aid by the Austrian government to reduce the loss-making flagship carrier’s debt pile.

It needs EU antitrust approval for the acquisition as such, as well as approval of the state aid involved in the deal.

Der Standard said that EU Competition Commissioner Neelie Kroes demands AUA significantly cut back capacity in order for her giving a nod to the state aid and acquisition.

Lufthansa has said from the outset that it would walk away from the deal if conditions were too onerous and Chief Executive Wolfgang Mayrhuber last week reiterated he was not interested in buying what he called a “little AUA.”

If the deal falls through, analysts expect that AUA will need a significant cash injection in order to survive, and AUA management has said it would have to cut its fleet by as much as half its current size if it had to operate alone. ($1=0.7115 Euro)

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