Lufthansa buys 41.56 per cent of Austrian Airlines' shares

The Supervisory Board of ÖIAG, Austria's privatisation and investment agency, has gave a green light to the sale to Lufthansa of its 41.56 per cent share in Austrian Airlines.

The acceptance of the Lufthansa bid is the result of a bidding process launched on August 13 in accordance with EU privatisation guidelines. The process was structured and carried out by ÖIAG and investment bank Merrill Lynch.

Peter Michaelis, CEO of ÖIAG, said: "The sale we have concluded is the right decision both for Austrian Airlines and for the business location surrounding Vienna International Airport in general. Partnership with Lufthansa consolidates the status of Austrian Airlines as a leading carrier in Central and Eastern Europe. At the same time, Austrian Airlines will remain a legally independent company, with its head office in Austria and its own brand, crew and fleet. In addition to this, the Lufthansa concept provides for the preservation of the long-haul connections that are so important for the location.

The chairman of the executive board and CEO of Lufthansa, Wolfgang Mayr-Huber, emphasised the benefits for both airlines and the location: "Europe needs a strong aviation sector. Only by combining our powers can we hope to find an answer to the global challenges currently facing our industry. For European business and Europeans as a whole, it is vitally important that we create an airline alliance consisting of profitably operating airlines. This is the only way we can hope to provide an infrastructure that meets the demands of customers".

Austrian Airlines will remain a broadly independent airline with its head office in Austria, its own brand, fleet and crew, and will be managed as a profit centre in the Lufthansa Group. Apart from improved access to international passenger flows and joint international marketing, the benefits for Austrian Airlines will consist of using the cost advantages and economies of scale that will result from integration into the Lufthansa Group. Total synergies on the revenue and costs side are estimated at around €80 million per annum.

Austrian Airlines CEO, Alfred Ötsch, said: "We are pleased that it has proven possible to reach an agreement between ÖIAG and our alliance partner of many years, Lufthansa. The strategic concept removes our structural weaknesses, such as a lack of international sales strength and disadvantages in purchasing. Together with our own measures, this will enable the almost total retention of our network strength. As a result, the benefits for our customers can be retained. None of this would have been possible - even with a great deal of additional capital - had we tried to go it alone".

Lufthansa will acquire all of ÖIAG's shares in Austrian Airlines at a price of € 366,268.75. ÖIAG will also receive a debtor warrant providing for a profit share based on the economic development of Austrian Airlines and the share price of Lufthansa compared to other airlines after three years. The maximum revenue from the debtor warrant is €162 million, and corresponds to the price of the public takeover offer.

At the same time, Lufthansa will receive a payment of €500 million to compensate for the negative shareholder value of Austrian Airlines. As Lufthansa already announced the company expects to submit a takeover offer to all shareholders in Austrian Airlines in the spring of 2009 at the average share price for the past six months of €4.44 per share. The aim is to take over a majority shareholding in Austrian Airlines.