Lufthansa to buy Austrian Airlines

VIENNA, Austria - Lufthansa on Friday agreed to buy the Austrian government's stake in ailing Austrian Airlines and offered to buy any outstanding shares.

The agreement signed by Lufthansa and officials of Austria's privatization agency gives Lufthansa the state's 41.56 percent share in its Austrian counterpart.

That deal carries a price tag of euro366,000 ($465,000) but foresees additional payments of up to euro162 million ($205.6 million) depending on whether, and to what degree, Austrian turns profitable again.

Lufthansa has also offered to buy the rest of Austrian Airlines for euro4.44 per publicly held share.

Austrian posted a net loss of euro16.4 million for the three months that ended Sept. 30. In the third quarter of 2007 it had reported a euro20.6 million profit.

Under the agreement, the Austrian government will assume up to euro500 million of the carrier's debt, which amounted to euro900 million as of last month.

Austria's government decided in August to sell its share in the country's flagship carrier. Air France-KLM and S7 of Russia had previously expressed an interest but then dropped out of the bidding.

Lufthansa head Wolfgang Mayrhuber said his company's concept was to "achieve increases in productivity without dismissals" of personnel, but cautioned that restructuring might be in the offing if economic recession spreads.

He said he hoped Austrian Airlines would reach "break-even" status within three years and then turn profitable.

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