German airline Lufthansa won European Union regulatory approval of its planned takeover of Austrian Airlines (AUA), the latest deal to boost its position in the fiercely competitive market.
Lufthansa said today the EU's green light paves the way for it to integrate AUA into the Lufthansa group next month, ending months of negotiations with the EU Commission and adding to its trophy case of acquisitions.
The German flag carrier also recently bought Brussels Airlines in a deal worth up to €250 million and lifted its stake in British carrier BMI to 80 per cent.
Airlines around the world are seeking to merge with or take over rivals to boost scale and expand into growth regions as travellers cut back on air travel in the global economic crisis.
In its talks with regulators, Lufthansa played hardball to limit the costs of its AUA acquisition, and ended up agreeing to some concessions only after the Austrian carrier had approved a third cost-cutting programme to slim down ahead of the buy.
The Commission, competition watchdog in the 27-country European Union, said Lufthansa would cede airport slots to rivals on routes from Vienna to Frankfurt, Munich, Stuttgart, Cologne and Brussels.
"This case shows that consolidation in the airline sector is possible with proper remedies to safeguard consumers' interests," European Competition Commissioner Neelie Kroes said in a statement on today.
AUA lost €429 million in 2008 and has piled up more than €1 billion in debt, or more than five times its equity. It only survived the past months due to a 200 million euro lifeline from the Austrian government.
The EU executive today also approved restructuring aid given by the Austrian government to loss-making AUA.
Analysts have said that while Lufthansa sees only €80 million 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.
Reuters