VIENNA: The sale of a controlling stake in Austrian Airlines by the Austrian government enters its more serious stage as prospective buyers filed business plans to make it on to a shortlist due to be drawn up next week.
The loss-making carrier - worth around 525 million euros ($735m) at yesterday's share price - is one of several European airlines being sold as rising fuel prices and a declining economy weigh on airlines' earnings.
The others include Spain's Iberia, Alitalia, Brussels Airways and Scandinavia's SAS, and several of the suitors involved are the same.
Germany's Lufthansa - also looking at SAS and Brussels Air - and Air France-KLM - with its eyes still fixed on a piece of Alitalia - both said they are bidding. So did Russia's number two airline S7.
Lufthansa is widely seen as the frontrunner of this trio. A sale to the Germans would be easiest to execute and least disruptive and expensive, mainly due to its existing close relationship with Austrian in the Star Alliance, analysts say.
"The working relationship is there, the language (German) is the same and there would be no switching costs," Citigroup analyst Andrew Light said in a note.
In contrast, Air France would face both switching costs, lost revenue during the handover and penalties when it brings Austrian under the wings of its SkyTeam alliance.
S7, on the other hand, aims to differentiate itself by promising to help Austrian grow rather than downsizing and cost-cutting, which is expected from both a Lufthansa and an Air France deal. But a less established name from outside the European Union may appear less palatable to Austria.
Meanwhile, Lufthansa is in talks to buy SAS as it hunts for bargains among airlines hit by crippling fuel costs and economic weakness, sources familiar with the matter said.
"Exclusive negotiations are being held," a sources said, adding that SAS had approached Lufthansa about a possible deal in May.
The sources stressed that a takeover of SAS, which is 50 per cent owned by the Swedish, Norwegian and Danish governments and over 7pc by the Wallenberg family, was not a foregone conclusion.
"Whether this leads to a deal remains open," said another source. "It's not fully clear yet where this will go."
SAS confirmed yesterday that it was evaluating "various structural possibilities for the group", but a spokesman declined to say whom the carrier was talking to.
