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Austrian seeks partner, prefers Lufthansa - source

History

Austrian Airlines’ supervisory board discussed a shortlist of four possible buyers at a Monday meeting and a majority prefers Germany’s Lufthansa, a source close to the supervisory board told Reuters.

The discussion took place in a meeting that decided to ask the Austrian government -- which owns 43% of the carrier -- to sell a stake to another airline to help it weather rising fuel costs and an economic slowdown. The other three airlines discussed by the supervisory board -- a non-executive body tasked with strategic company decisions -- were Russia’s Aeroflot, Air France-KLM and Turkish Airlines, the source said. “The majority has a distinctive bias towards Lufthansa,” said the source, who requested anonymity. “It is now up to (the government’s holding company) OeIAG to initiate the next steps necessary for a privatization.” The source added that the supervisory board did not discuss how big a stake should be sold. “We don’t know yet who wants to have us and how much they want,” he said.

OeIAG’s head Peter Michaelis, who also chairs Austrian’s supervisory board, said in a statement issued by AUA that OeIAG would recommend the government mandate it to sell a stake in Austrian. He did not identify possible buyers. In a separate statement, Austrian posted a 52% rise in Q2 net profit to €11.7 million ($18.4 million), better than analysts had predicted, and reiterated its full-year outlook of a €70-90 million net loss. The carrier will present more detailed results on Tuesday. Shares in the airline rose as much as 32% on Monday on investor hopes of a stake sale, but they pared gains later in the session and closed up just 3.2% at €3.58 -- still 37% more than a week ago.


STRATEGIC REVIEW

Austrian had asked The Boston Consulting Group last month to review its options after a Saudi investor pulled out of a planned investment earlier this year, and after rising fuel prices forced it to issue a profit warning last month. Based on the study, which was discussed in the Monday meeting, the board concluded that it was still possible to go alone, but that this would require “drastic measures” and would have worse consequences for Vienna as an air travel hub.

The Austrian government could consider the supervisory board’s recommendations at its next meeting on August 12. The co-governing conservatives favor privatization. Chancellor Alfred Gusenbauer’s centre-left Social Democrats are more skeptical but their new leader, transport minister Werner Faymann, has said he was not opposed in principle as long as the entire government stake was not sold.

Austrian newspaper Kurier on Monday reported that the Social Democrats may link their approval of a stake sale to the resignation of Austrian CEO Alfred Oetsch. With the country heading for an early election on September 28, the government’s decision will be made against a backdrop of election campaigning which analysts say may lead to only a restricted privatization mandate. (Reuters)

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