EU probes Lufthansa's Austrian Airlines takeover

(BRUSSELS) - The European Commission on Wednesday put off a ruling on Lufthansa's takeover of Austrian Airlines and opened an in-depth probe that could jeopardise the deal, which was opposed by rival airlines.

Competition Commissioner Neelie Kroes announced the decision in a statement, saying there were fears that the takeover would lead to higher ticket prices for passengers and possibly fewer flights on some routes.

"It is essential that airline consolidation does not deprive consumers of a choice of airlines, competitive prices and other benefits of liberalisation of air transport in the European Union," Kroes said.

"I hope that, in a spirit of mutual cooperation, we will be able to work closely with Lufthansa in the coming weeks to find timely solutions to these concerns."

Lufthansa -- the biggest airline in Germany, with hubs in Frankfurt and Munich -- said it found the announcement "surprising," but added it was "confident" it would eventually get approval from Brussels.

"Due to the fact that since many years a joint venture exists between Lufthansa and Austrian Airlines the opening of the in-depth investigation... is surprising for Lufthansa," it said in a statement.

A source close to the matter, speaking on condition of anonymity, told AFP earlier: "Lufthansa's offer for Austrian Airlines expires July 31 and if the conditions are not met then they will drop the offer."

Lufthansa signed a deal last year to acquire a 41.6-percent stake in AUA from the Austrian state holding company OeIAG for the symbolic sum of one euro cent per share or just over 366,000 euros (518,000 dollars) in all.

One of the conditions was an agreement that the Austrian state would absorb 500 million euros -- or just over a third -- of AUA's debts.

But those terms have enraged rival airlines, such as Air France-KLM, which had also sought to buy AUA, as well as other airlines such as British Airways and Irish low-cost carrier Ryanair.

Brussels also has to approve 500 million euros in Austrian state aid for Austrian Airlines, under a separate investigation.

Lufthansa already controls a number of European airlines -- a point underscored in Kroes's statement -- including Swiss International, Eurowings and low-cost carrier Germanwings.

Its proposals to acquire British Midland and Brussels Airlines -- the latter the rump of defunct Belgian carrier Sabena -- were cleared by the European Commission, which enforces EU competition law, in May and June this year.