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Austria looks to take on airline debt ahead of sale

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Written by editor

Austria’s government indicated on Monday that it would likely take over some of the debt of Austrian Airlines before selling it.

Austria’s government indicated on Monday that it would likely take over some of the debt of Austrian Airlines before selling it. Germany’s Lufthansa and Russian carrier S7 Airlines are both contenders.

Lufthansa has demanded that the government government take over 500 million euros ($631 million) of the flag carrier’s debts of around 900 million euros.

The state “might be ready to contribute financially in order to make the sale go through,” Transport Minister Werner Faymann said.

According to media reports, Lufthansa is offering only a symbolic price for the government’s 42.75 percent stake in Austrian Airlines, with an option of paying more once the ailing carrier has recovered, according to DPA news service.

Russian carrier remains interested

The German carrier was seen as the only remaining bidder for government stake, but the holding’s chief executive officer, Peter Michaelis, confirmed Monday that S7, Russia’s leading domestic airline, was still among the suitors.

Air France-KLM dropped out of the bidding process last week, citing a lack of transparency of Austrian Airline’s part in disclosing existing cooperation contracts with Lufthansa.

The government’s mandate to privatize its 42.75 percent stake in Austrian Airlines was scheduled to run out Tuesday, October 28. But the process was likely to be prolonged until December 31, the Finance Ministry has announced.

With its fleet of 264 aircraft, Lufthansa made 3.02 billion euros in earnings before interest, taxes, debt and amortization (EBITDA) in 2007. Operating 71 airplanes, S7’s EBITDA was 81.6 million euros last year.

Faced with high fuel costs and a decreasing numbers of passengers flying on its 99 aircraft, Austrian Airlines expects to end the year with a deficit of 125 million euros.