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Lufthansa becomes new owner of Austrian Airlines

After over a year of negotiations, Lufthansa has officially taken over indebted Austrian Airlines in a deal costing 220 million euros, threatening the dominance of rival Air France-KLM in Europe.

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AFP - German flag carrier Lufthansa formally closed its acquisition of Austrian Airlines (AUA) on Thursday in a move it hopes will enable it to overtake Air France-KLM as Europe's biggest airline.

It has been long and stony road before the deal could be finally completed, with more than a year of tortuous negotiations, fierce opposition from rival airlines and competitive concerns on the part of the European Commission.

But Brussels finally gave its green light last month after Lufthansa agreed to a number of concessions. And the German airline announced Thursday that it now owned more than 90 percent of the shares in AUA and the remaining shareholders would be "squeezed out" by September 9.

At a special news conference at Vienna's Schwechat airport, the German flag carrier's chief executive Wolfgang Mayrhuber said the Austrian group would stop losing money in 2010.

"We're currently burning money, we're 'cash negative'," the CEO, himself an Austrian, said.

"We'll be 'cash positive' next year. Then the aim will be to return to the black at an operating level as quickly as possible," Mayrhuber said.

In all, the acquisition will cost Lufthansa 220 million euros (315 million dollars). It bought the Austrian state's stake of 41.56 percent for the symbolic sum of 0.01 euro per share or 366,268 euros in all.

And on top of that, it offered to buy out the remaining shareholders for 4.46 euros per share.

Mayrhuber said Lufthansa viewed the purchase as "a long-term investment and not a project for just one or two years."

Nevertheless, great demands would be made of AUA's employees, the CEO warned.

"We want red uniforms, not red numbers," he said, referring to AUA's bright red uniforms. "But we know we can't expect miracles."

Even though the Austrian government agreed to assume around one third of AUA's debt as part of the deal, the carrier remains saddled with debts of one billion euros.

And it ran up a loss of 166.6 million euros in the first six months of this year.

Under restructuring measures already being implemented, around 1,000 jobs are being cut from a total 7,300. Among the conditions for EU approval, AUA will have to reduce capacity by about 15 percent by the end of 2010.

Nevertheless, AUA is the leading airline in central and eastern Europe. It transported a total 10.7 million passengers in 2008 and has a fleet of 91 aircraft.

So, it will give Lufthansa a lift up in the race to be Europe's number one airline.

Last year, Lufthansa transported 70.5 million passengers, behind Air France-KLM with 74.4 million.

The German airline already owns Swiss, Air Dolomiti, Eurowings and Germanwings and is in the process of gradually taking over British Midland and SN Brussels Airlines.

Asked whether Lufthansa was planning to expand even further, Mayrhuber said the group now wanted time to consolidate its acquisitions.

"For the moment, our prime task is to re-establish our own profitability," he said.

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