VIENNA (AFP) — Austria approved the sale of its stake in loss-making flag carrier Austrian Airlines to Germany's Lufthansa on Friday, despite protests from unions, opposition parties and rival airlines.
At a special signing ceremony in the headquarters of OeIAG -- the state holding company which holds the main stake in troubled AUA -- OeIAG chief Peter Michaelis and Lufthansa chief executive Wolfgang Mayrhuber signed the contract.
Under the terms of the deal, OeIAG will sell its 41.6-percent stake to Lufthansa for a symbolic sum of one euro cent per share or just over 366,000 euros (467,000 dollars) in all.
That sum could eventually reach 162 million euros, depending on AUA's future economic performance and the price of Lufthansa's shares over the next three years.
Another condition of the deal was that the Austrian state absorb 500 million euros of AUA's debts, or more than one third of the airline's total debt position of some 1.4 billion euros.
It is this element that has enraged rival airlines, which complain the state aid is a distortion of competition and have asked Brussels to intervene.
Lufthansa has also said it will launch a public takeover bid for the outstanding shares at a price of 4.44 euros per share or a total 215 million euros.
But that offer and the deal for the state's shares will only be valid if the German group succeeds in securing a stake in AUA of more than 75 percent.
Shareholder groups argue that Lufthansa will have to raise the price if its offer to be successful.
"It's a sensible lower limit," said the head of the IVA shareholder association, Wilhelm Rasinger.
However, since some 500 million euros of AUA's debt were also to be written off using public money, the value of the company was worth around six euros per share more.
IVA nevertheless saw it as "positive" that AUA was getting a "competent core shareholder" in the shape of Lufthansa.
Elsewhere, however, the deal has come under heavy fire.
The labour representatives on OeIAG's supervisory board all voted against it at a meeting Friday, said the representative of the OeGB labour union, Leopold Abraham.
"The circumstances surrounding the sale process, the offer that Lufthansa has put on the table, and the many open questions about it are the main reasons why the labour representatives on the board voted against the sale," Abraham told AFP.
Austria's opposition parties, the environmentalist Greens and the far-right parties FPOe and BZOe, also slammed the terms of the deal, saying the government had ignored a recommendation two years ago by corporate consultants Roland Berger to merge AUA with another airline.
Now, it was being sold off for next to nothing and the government was giving it 500 million euros in the form of the debt write-off, noted the Greens' transport spokeswoman Gabriela Moser.
At a press conference after the signing ceremony on Friday, OeIAG chief Michaelis defended the sale.
"The partnership with Lufthansa will cement AUA's status as the leading carrier in central and eastern Europe," he said.
The Austrian carrier would remain a legally independent subsidiary with its headquarters in Vienna, its own brand-name, crew and aircraft fleet, Michaelis insisted.
Lufthansa CEO Mayrhuber also underlined the advantages for both airlines.
"Europe needs a strong airline industry," he said. "Together, we can respond to the global challenges facing the sector. It's vital for the European economy that we create an alliance of profitable airlines.
"The combination of Lufthansa and Austrian Airlines a step in this direction," said the Austrian-born executive.
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