Austrian Airlines' joint chief executives Herbert Bammer and Mario Rehulka, finally forwent a deal Air France and Delta Air Lines to join the Star Alliance.

However, there is a lingering doubt whether Austrian's application to gain new anti-trust immunity with United Airlines will be approved and, more importantly, the route network to and from Germany, North America and Eastern Europe has yet to be worked out.

Bammer says he has received assurances from lawyers that this would not be a problem in Germany, but has heard nothing about Eastern Europe.

"When we calculated the difference between the existing alliances, including possible synergy and the financial results, Star clearly came out on top," he says. Joining Star will produce a loss of ATS100 million ($7.5 million) in the first year, but produce ATS300 million income annually thereafter.

Austrian's decision is based on the need to maximise traffic between Austria and Germany with Lufthansa. These routes mean more to Austrian than the uncalculated potential of Delta and Air France.

But even though the airline denies it, Austrian has chosen an alliance in which it will play only a bit part and where it will be dwarfed by the likes of Lufthansa and United. Bammer and Rehulka insist that Austrian has a "guarantee of independence", but would not elaborate.

The Austrian move will come as a major blow for the new Delta/Air France alliance. It also signals the beginning of the end for the Qualiflyer Group. Rehulka says the trouble with the Delta/Air France group is that is not sufficiently structured. But some analysts question the wisdom of Austria's decision to switch. Austrian had virtually no overlap with either Delta or Air France and it had a captive market into Eastern Europe with the opportunity to link up to a powerful duo as a founding member of a global alliance.

"Basically Austrian would have had a hand in the shape of the whole alliance," says airline analyst Anthony Bor of Merrill Lynch.

Source: Airline Business