European consolidation moves gather new pace

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Star Alliance carrier Lufthansa lodging a fresh concessions offer to European regulators over its move to takeover Austrian Airlines could be taking the German airline closer to completing its planned consolidation moves.

Lufthansa has been trying to obtain clearance to buy Austrian to meet an end of July deadline, but has been locked in a stand-off with the European Commission after regulators ruled the German airline's proposals did not go far enough to allay competition concerns. The EC has been looking at the planned acquisition since February after raising concerns Austrian was not being sold to Lufthansa at a fair price, and that the privatisation procedure has not been sufficiently transparent.

While acknowledging Lufthansa's informal remedies "reduced significantly" initial competition worries, the EC refused to clear the takeover saying it was still not satisfied with the situation on certain routes. Stalemate followed as Lufthansa argued the Commission's insistence on an improved remedy package meant it is "paying twice" for Austrian, given that Lufthansa agreed a set of measures to secure co-operation with the carrier in late 2001.

But with the clock ticking,Lufthansa has now submitted a new final proposal. "This is the maximum that we think is economically viable," says the airline. The EC has yet to indicate if the revised offer will be sufficient, although sources familiar with the negotiations suggested, before the new submission, that Lufthansa had been fairly close to meeting the requirements.

Austrian is one of a number of acquisitions Lufthansa has been working on. In June it secured EC approval for its acquisition of a 45% stake in Brussels Airlines and broke the deadlock over its acquisition of a 50% plus one share stake in UK operator bmi later the same month.

While Lufthansa has been progressing its consolidation efforts, British Airways and Iberia have struggled to make headway in their merger talks. Iberia has dismissed any connection with the BA talks and July's sudden departure of chief executive Fernando Conte, who will be succeeded by former director Antonio Vazquez.But BA chairman chairman Martin Broughton is hoping Iberia's change of senior management will help accelerate the drawn-out merger process. "We are hopeful that the management changes at the top of Iberia announced will provide an impetus to discussions," he says.