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Not Allaying Antitrust Concerns

EU not likely to approve Lufthansa takeover of Austrian Airlines  Jul 10, 2009

European Union regulators charged Friday that Lufthansa AG has not done enough to allay antitrust concerns over its bid for Austrian Airlines, and they are now unlikely to approve it by the end of the month.

Lufthansa has the right to pull out of the takeover if EU approval doesn't come through by July 31. The European Commission says it must examine the deal closely because it thinks it could reduce choice and hike fares for passengers on some routes.

EU spokesman Jonathan Todd said Lufthansa had talked to regulators about making changes but these were "worse" than an earlier offer. He did not give details on what Lufthansa has suggested.

Todd said it would be impossible for regulators to approve the deal unless they received "concrete remedy proposals from Lufthansa in the next few hours" that eliminated the EU's competition worries. The EU must decide on approving or blocking the bid by November 6.

The EU executive says the new company could become too powerful on flights from Vienna to Frankfurt, Munich, Stuttgart, Cologne, Zurich, Geneva, and Brussels. Lufthansa is Germany's biggest airline and Austrian Airlines dominates routes out of Austria.

Lufthansa last month resolved similar EU fears that its bid for Brussels Airlines would make it the only airline running some routes out of the Belgian capital.

Regulators approved the deal after Lufthansa agreed to sell off airport slots to rivals — a move that would help rivals launch competing services.

Slots are the daily periods of time that airlines get to land and take off from airports. They are valuable, changing hands for as much as 30 million pounds (US$48 million) a pair at Europe's busiest airport, London Heathrow.

Antitrust officials are separately looking into whether the Austrian government is selling Austrian Airlines at a fair price to Lufthansa. They launched an investigation in February, saying they believed that the price could be too low and may be an illegal state subsidy.

The German carrier plans to pay euro366 million to buy the Austrian government's 41.56 percent stake in the country's struggling carrier. The deal also sees Austria take on euro500 million of Austrian Airlines' debt and leaves the door open to more payments in the future.

EU subsidy rules restrict government handouts for businesses.

EU not likely to approve Lufthansa takeover of Austrian Airlines
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