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Topic: OS To Be Privatised
Username: NG1Fan
Posted 2008-07-01 07:02:35 and read 2291 times.

According to the Kurier newspaper, the OeIAG, the main government shareholder (42.75%) is possibly looking to off-load its stake in OS. Possible suitors, according to the article, include airlines such as LH and AF/KLM.

Article, in German only: http://www.kurier.at/geldundwirtschaft/172533.php

Well, I always thought that OS was too small to be a world-wide player and too small to be a regional carrier. LH would seem the obvious candidate, but discuss away!

NG1Fan

Topic: RE: OS To Be Privatised
Username: Beaucaire
Posted 2008-07-01 07:18:14 and read 2225 times.

The egg-heads from Boston Consulting also brought in Qatar as a serious option ...
While most people in Austria understand the seriousness of the situation,they'd rather sell to a Middle Eastern airline than to LH,even if the latter would be the logic economical choice.
But the feeling of depending in their airline -infrastructure on the big brother from the North is just something that does not go down to well !
Aeroflot has been in the talks but I rather don't think they will ever move and buy a European carrier-they speak since years of doing it and never moved in. (Malev,CSA,Alitalia )
The good news is finally the decision to sell !

Topic: RE: OS To Be Privatised
Username: AustrianZRH
Posted 2008-07-01 07:42:51 and read 2142 times.

I'd prefer LH, 2nd choice another *A carrier (wasn't NH or OZ mentioned?). Don't want them to move the alliance!

Topic: RE: OS To Be Privatised
Username: Mhodgson
Posted 2008-07-01 09:21:55 and read 1983 times.

Would this have any effect on VO?

Topic: RE: OS To Be Privatised
Username: AustrianZRH
Posted 2008-07-01 09:43:51 and read 1930 times.

Well, as VO, like OS and NG, is wholly owned by the Austrian Airlines Group (which is the entity to be sold), yes!

Topic: RE: OS To Be Privatised
Username: Addd
Posted 2008-07-02 08:47:31 and read 1609 times.

More on the subject - AF/KL, LH, SU, EK and QR are named as potential bidders.

http://www.bloomberg.com/apps/news?p...1085&sid=aHN9xS_KjVYY&refer=europe

Austria Hires Merrill Lynch to Find Buyer for Airline (Update2)

By Matthias Wabl and Zoe Schneeweiss

July 1 (Bloomberg) -- The Austrian government hired Merrill Lynch & Co. to help find a buyer for Austrian Airlines Group as record oil prices wipe out profit at the country's biggest carrier, four people familiar with the decision said.

The OIAG state-assets agency picked the U.S. bank to explore a possible purchase of Vienna-based Austrian by airlines including Air France-KLM Group and Deutsche Lufthansa AG, according to the people, who declined to be identified because the appointment hasn't been made public.

The government, which holds a 43 percent stake in Austrian Airlines, said June 10 it's seeking an investor after the sale of a 20 percent stake to Saudi hotelier Mohamed bin Issa al Jaber collapsed in May because the company had a wider-than-expected net loss of 60 million euros ($95 million) for the first quarter.

''Finding a partner airline is vital in the current economic situation and with high oil prices,'' said Paul Wessely, an analyst at UniCredit in Vienna. Bidders might include Russia's OAO Aeroflot, Qatar Airways and Dubai-based Emirates, he said, as well as Air France and Lufthansa, Europe's two biggest airlines.

Austrian Airlines fell 33 cents, or 9 percent, to 3.32 euros, the sharpest drop since April 24. The stock has slumped 47 percent this year, cutting the company's market value to 284 million euros.

Victoria Garrod, a spokeswoman for Merrill Lynch in London, declined to comment on whether it had been hired by Austria. The New York-based bank ranks seventh this year among advisers on mergers and acquisitions, according to data compiled by Bloomberg.

Patricia Strampfer, a spokeswoman for Austrian Airlines, said the hiring of a bank ''is the responsibility of the owner, in this case the OIAG.'' Anita Bauer, a spokeswoman for the state assets agency, declined to comment.

More Options

There are more options for partnerships than initially envisaged, Austrian Airlines said June 25, citing research commissioned from Boston Consulting Group. The carrier said it will present a ''smaller choice'' of possible investors to its supervisory board at the end of this month.

Austrian may have a net loss of 70 million euros to 90 million euros this year, it said on June 9. The airline is hedged on only 20 percent of its fuel requirements, leaving it exposed to oil prices that have surged 47 percent in six months.

Austria's coalition government may task OIAG with selling the carrier when ministers hold their only scheduled meeting of the summer recess on August 6.

Lufthansa Concern

The coalition partners have disagreed on the best solution for the airline. Finance Minister and People's Party chief Wilhelm Molterer wants a decision on its future by the end of the year and said on June 10 that a sale is the most likely scenario. The Social Democrats oppose a partnership with Lufthansa in particular, arguing that the German carrier would hurt the economy by reducing the status of Vienna airport and favoring its own hubs in Frankfurt, Munich and Zurich.

Lufthansa Chief Executive Officer Wolfgang Mayrhuber said on June 16 that Austrian's network would fit well. Spokeswoman Stephanie Stotz today said the Cologne-based company would look at the smaller carrier ''if they come to us.'' She declined to say if the two have held talks. Air France spokeswoman Brigitte Barrand in Paris declined to comment.

To contact the reporter on this story: Matthias Wabl in Vienna at mwabl@bloomberg.netZoe Schneeweiss in Vienna at zschneeweiss@bloomberg.net.

Last Updated: July 1, 2008 12:53 EDT

Topic: RE: OS To Be Privatised
Username: HanginOut
Posted 2008-07-02 13:17:17 and read 1488 times.



Quoting Addd (Reply 5):
The coalition partners have disagreed on the best solution for the airline. Finance Minister and People's Party chief Wilhelm Molterer wants a decision on its future by the end of the year and said on June 10 that a sale is the most likely scenario. The Social Democrats oppose a partnership with Lufthansa in particular, arguing that the German carrier would hurt the economy by reducing the status of Vienna airport and favoring its own hubs in Frankfurt, Munich and Zurich.

IMO, I don't think OS has any real choice other than to be acquired by LH. One thing people are forgetting is that LH owns Miles and More (the loyalty programme used by OS and LH). They have all of the passenger info for OS' frequent flyer customers. Can you imagine what would happen to OS if they were sold to another airline? The next day LH would announce massive targeted deals to all of OS' customer base, likely driving OS into the ground.

I think that the Austrians are just going to have to get over their dislike (I'm being generous when I use this term, the Austrians really don't like Germany at all) of Germany and LH and realise that they are probably the best (and only) option for OS to survive. Also, LH has shown with LX that they have no problem with keeping an airlines identity and growing the home base as a hub that fits into the overall LH strategy.

Topic: RE: OS To Be Privatised
Username: Addd
Posted 2008-07-02 13:52:50 and read 1449 times.

Another good article on the subject (today's FT):

http://www.ft.com/cms/s/0/4af40500-47d1-11dd-93ca-000077b07658.html

Austrian Airlines struggles to stay on course
By Haig Simonian

Published: July 2 2008 03:00 | Last updated: July 2 2008 03:00

Austrian Airlines celebrated its 50th anniversary in style earlier this year. But whether the troubled mid-sized carrier can survive the next half century as an independent company is now in doubt.

Last week, the airline's supervisory board said it had made progress in identifying potential partners and would move to a more detailed analysis, with a view to coming up with recommendations by the end of July.

That marks an extraordinary change of course for a company that, barely two years ago, seemed one of Europe's more secure flag carriers. For AUA, as it is known in Austria, a small domestic market was compensated by a fast growing network in central and south eastern Europe and steady inbound tourist traffic, particularly from Asia.

But while some weaker neighbours, notably Swiss International Air Lines, had pared fleets and networks and renegotiated labour and supply contracts, AUA had done little.

Now, such inaction has come to bite. In the first quarter, the company lost more than €60m ($95m). Alfred Ötsch, chief executive, has warned that could rise to €90m for the year.

The causes are both familiar and specific. Surging fuel prices will cost AUA an additional €130m this year while competition from low-cost rivals has intensified. Vienna International Airport has welcomed budget carriers, which now account for about 20 per cent of business at AUA's hub.

But many of AUA's problems are home grown. In spite of tougher conditions, the group failed to implement radical cost cuts. Its fleet remains extremely heterogeneous - a legacy of absorbing two other airlines, with differing aircraft - so adding cost and complexity. So far, rationalisation has been limited to selling AUA's Airbus A340 long-haul jets amid limited network pruning. More radical streamlining has depended on buying new aircraft, which AUA can ill afford.

This year brought hope of relief in the form of a €150m capital injection from Mohamed bin Issa Al Jaber, a Saudi-born sheikh with business interests in Austria. However, even that turned into farce as Sheikh Mohamed Al Jaber pulled out at the last moment, claiming he had been misled about the airline's finances. AUA last week said it was taking legal action.

That inauspicious backdrop has now obliged the group, and the Austrian state that owns almost 43 per cent of its shares, to consider partnership with another airline - previously taboo. Even the Austrian government, which always stressed AUA's ability to remain independent, has grown more amenable.

The problem is that suitors are hard to find. Lufthansa, the likeliest on business and geographic, as well as linguistic and cultural grounds, has expressed polite interest, but no more. Air France-KLM could benefit from AUA's east European franchise but has kept its distance, perhaps aware of the complexity of having to pull AUA out of the Lufthansa-led Star Alliance group in favour of its own Sky Team. Aeroflot of Russia has also expressed interest but its intentions are hard to judge.

Lufthansa's credibility as a partner has been heightened by its experience over the past three years running Swiss. A mixture of cost savings and revenue growth have made the German group's takeover of the formerly independent Swiss carrier significantly more profitable than expected.

However, airline industry analysts warn that the two cases are only superficially comparable. Swiss had undertaken three rounds of restructuring after its creation from the ashes of the former Swissair.

Those painful steps meant the company had achieved a relatively favourable cost structure; Lufthansa would be loath to take on AUA unless much the same groundwork had been undertaken there.

Moreover, the Germans would be interested only in a majority stake - or, at the very least, a minority with a clear commitment to control within a reasonable time. "The last thing you want is minority ownership but with moral responsibility for another airline's problems," says an industry insider.

However, ceding control is something Austria's politicians, and possibly the three domestic financial services groups whose 7.25 per cent stake in AUA is pooled with that of the government to make a majority, are unwilling to countenance.

The financial services companies are concerned a new owner could pare AUA's services to central and south eastern Europe, where they have extensive businesses. Others are worried about the possible implications of a sale for Vienna's status as a regional hub.

The airline's future is also a tricky political issue for Austria's fractious grand coalition government. Wilhelm Molterer, finance minister and senior representative of the conservative Austrian People's party, has indicated willingness to sell control. However, Alfred Gusenbauer, the Social Democratic chancellor, is hostile, as is his left leaning party.

Matters have been additionally complicated by Mr Gusenbauer's political weakness, amid accusations that he has been too accommodating to his coalition partner.

Last month, Boston Consulting Group was commissioned to report on AUA's options. However, it does not require expensive management consultants to work out that they are limited


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