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Austrian Airlines seeks strategic partner, Silverjet revival plans

11-Jun-2008

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Austria's Finance Minister, Wilhelm Molterer, appears to have accepted the inevitable, viewing a continued "stand-alone" approach for Austrian Airlines as "rather unlikely".

Last month, the carrier’s CEO, Alfred Oetsch stated, “stand-alone was my mandate when I was appointed [in 2006]. We aimed for that with all our strength. But general conditions have changed, now everything is different, and we would anyway [need] to explore stand-alone or partnership options”.

Mr Oetsch added he was “deeply convinced” before the extreme oil price rise that management could “balance Austrian Airlines positively in an enduring way - now I am no longer so certain”.

The Austrian Government owns 42.75% of Austrian state industrial holding OIAG, which previously tried to sell a 20% strategic stake in the 50-year-old carrier to Saudi Sheik Mohamed Bin Issa Al Jaber, as part of a capital increase. That deal collapsed after the release of the airline’s first quarter earnings (typically the weakest quarter for the airline), in which it reported a EUR60.4 million net loss.

Sheik Mohamed claimed he had been misinformed about the true state of the carrier's business development when he signed a preliminary agreement to participate in the capital increase on 03-Apr-08.

This week, Austrian updated its guidance, and now expects net losses of EUR70 million to EUR90 million this year, while it scrapped its 2009 forecast altogether. Austrian stated, “due to the current situation in the industry, the previous forecasts for 2009 are outdated”, adding “reliable earnings estimates for 2009 and subsequent years will only be presented once the results of the strategic review are available”. Initial results of the review will be published by the end of Jul-08, with recommendations to be presented to the carrier's owners by the end of Sep-08.

In the meantime, Austrian’s uncertain financial outlook makes it very difficult for any would-be investors. Air France-KLM CEO, Jean-Cyril Spinetta, confirmed it is not looking at Austrian (a day after he closed the door on Alitalia), while Lufthansa has previously stated it would look at Austrian if and when it is approached by the carrier.

Russia's Aeroflot has also said it might be interested in Austrian, as part of its plan to expand in Western Europe. But sale conditions, including the degree of control, will be crucial in Aeroflot’s deliberation.

Meanwhile, all-Business Class carrier, Silverjet, also the subject of a back-down by a Middle East white knight investor, is close to being rescued after a Swiss trust company agreed to buy it out of administration. Kingplace (backed by Geneva-based Heritage Cie), finalised principal terms this week with Silverjet's administrators, Begbies Traynor. ArabJet, a Dubai-based all-Business carrier is also reportedly interested in SilverJet, which has pledged to expand to Dubai if it secures fresh funding.


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