Lufthansa's intended acquisition of Austrian Airlines is under threat from European competition authorities who doubt the takeover conforms to criteria governing state aid and rescue of struggling companies.
The European Commission is to open a formal investigation into the acquisition, after raising concerns that Austrian is not being sold to Lufthansa at a fair price, and that the privatisation procedure has not been sufficiently transparent.
Lufthansa's takeover centres on an initial purchase price of €366,268 ($473,000) for Austria's 41.56% holding in its flag carrier - equating to €0.01 per share. The Austrian government is to receive a debtor warrant, which could result in an additional payment, but also provides for a restructuring grant of €500 million.
But the EC has expressed doubt that the price being paid by Lufthansa - including the debtor warrant - reflects "the market price for what is being sold".
"We will survive but not independently"
Austrian management board
It also questions whether the Austrian government can claim to be acting as a private investor and whether the restructuring plan for the airline complies with European rules on rescuing companies in difficulty.
European Commission regulators have already cleared a €200 million bridging loan for Austrian, designed to keep the carrier operating while investigations into the privatisation proceed.
SkyTeam carrier, and rival interested party in the tender for the Austrian stake, Air France-KLM had in December lodged a state aid complaint with the EC protesting the terms of the proposed takeover.
Austria's state holding company, OIAG, says it will proceed on the basis that result of the EC investigation will be positive and the takeover successful.
Earlier in February Andreas Bierwirth and Peter Malanik were appointed joint members of the group's management board following the sudden departure of Austrian chief executive Alfred Otsch at the end of January. The carrier immediately embarked on cost-cutting measures aimed at ensuring survival until the second half of the year.
"We are convinced we will do it," says Bierwirth. "We will survive but not independently - ours is not a future as a standalone carrier." Austrian hopes to save €225 million, half of which will come from capacity cuts, while another €50 million will come from salary cuts.