Lufthansa's intended acquisition of Austrian Airlines is under threat from European competition authorities who doubt that 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 for the Austrian state's 41.56% holding in its flag-carrier - a sum which equates to €0.01 per share.
The Austrian Government is to receive a debtor warrant, which could result in an additional payment, but will also provide a restructuring grant of €500 million.
But in a statement today the Commission says it "expresses doubt" that the price being paid by Lufthansa - including the debtor warrant - reflects "the market price for what is being sold".
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 rules on rescuing companies in difficulty.
"We have doubts concerning existence of state aid and whether this state aid can be declared compatible with the common market," says the Commission.
It adds that it is sceptical about the nature of the sale, particularly regarding whether it was "truly open, transparent and unconditional" and whether the Austrian Government "really acted" as a market economy investor.
"With regard to the compatibility of the aid the Commission has doubts on whether the amount of the aid has been kept to a minimum," it states, "and whether the restructuring plan submitted by Austria will restore the long-term viability of the company in the shortest possible time and without the need for additional aid in the future."
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