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Austria hires Merrill on airline sale-source

Jul 01, 2008

LONDON - The Austrian government has appointed Merrill Lynch & Co Inc to advise it on a possible sale of loss-making Austrian Airlines (AUA), a source familiar with the matter said on Tuesday.

The appointment marks the government's first concrete move towards selling its 43 percent stake in AUA, or part of it, as rising kerosene costs weigh on the carrier's bottom line. A capital injection by a Saudi investor failed earlier this year.

Merrill Lynch declined comment. Austria's finance ministry and the government holding company OeIAG also would not comment.

Finance Minister Wilhelm Molterer said last month he was open to all options for AUA, but a strategic partner taking a stake in the national carrier was the most likely scenario.

The Social Democrats, who lead the government in coalition with Molterer's conservatives, have in the past opposed a sale but said they were open to a "strategic partnership".

Airlines including Germany's Lufthansa already an AUA partner in the Star Alliance airline pact, Russia's Aeroflot and Air France-KLM have said they would take a look at AUA if invited to by the government.

AUA predicted last month that it would run up a net loss of up to 90 million euros ($142 million) this year because of rising fuel costs that it could not compensate for.

Its shares have dropped 46 percent this year and traded down 7.4 percent at 3.38 euros by 1457 GMT on Tuesday. At this price, the government's stake is worth around 125 million euros.

Austria hires Merrill on airline sale-source

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