Arabian Knights: Al Jaber leaves Austrian Airlines standing at altar

Arabian Knights: Al Jaber leaves Austrian Airlines standing at altar
By Simon Morgan AFP - Sunday, May 18 05:12 am

VIENNA (AFP) - It was to have been a marriage made in heaven.

When Austrian Airlines and would-be investor, Saudi billionaire Mohamed Bin Issa Al Jaber, announced they were tying the knot in March, the airline's main shareholder, the state-owned holding company OeIAG, hailed the deal as a "win-win situation."

But barely two months after the two love-birds announced their engagement, the wedding appears to have been called off. And both sides are now only talking via their lawyers.

Officially, Al Jaber still has until May 21 to decide whether to make his wedding vow after all. But observers believe that is unlikely.

And the Austrian flag carrier is increasingly looking like a bride who has been jilted at the altar.

Finance Minister Wilhelm Molterer said in Brussels this week that he wanted AUA to remain independent.

"What I want is a red-white-red airline," he said, referring to the colours of the Austrian flag.

But "if another alternative is necessary, then that is part of the strategic deliberation," he said.

Potential suitors are hardly queuing up, however.

The most obvious would be German flag carrier Lufthansa. The two airlines already know each other very well from Lufthansa's Star Alliance and the German carrier's chief executive Wolfgang Mayrhuber is Austrian.

But Lufthansa has made it clear it would only tie the knot if AUA were debt-free and the Austrian carrier is around one billion euros (1.55 billion dollars) in the red.

National egos could get in the way, too, since AUA's home base in Vienna, an important hub for eastern Europe, could draw the shorter straw against Munich airport, Lufthansa's number two hub after Frankfurt.

Air France has also been mooted as a possible partner. But a tie-up there would necessitate AUA leaving Star Alliance to sign up to the French carrier's Sky Team and that could prove costly.

The investment by Al Jaber did seem to be the ideal solution.

The Sheikh, who has Austrian citizenship and owns three of Vienna's most luxurious hotels, is estimated to be worth some 5.3 billion dollars.

With him, AUA hoped to press ahead with its planned expansion in the near and Middle East.

So when Al Jaber agreed on March 10 to buy a 20-percent stake in return for putting up 150 million euros of fresh capital, OeIAG chairman Peter Michaelis said: "We believe it will create substantial added value for the airline and its shareholders."

Just days later, AUA published its 2007 results showing it flew back into the black with its first full-year profit in four years.

But on April 24, AUA announced that tougher competition and high kerosene prices had driven it back into a first-quarter loss in the first three months of this year.

The news sent the group's shares into a nosedive on the stock exchange and that was when Al Jaber started to get cold feet. He claimed management had "intentionally misled" him about the state of the company's finances, meaning the 7.10 euro-per-share price tag he was paying was much higher than AUA's shares were worth.

According to a report in the daily Die Presse on Friday, there was another reason why deal ran aground.

Quoting sources close to the negotiations, the newspaper said Al Jaber had wanted to use AUA to resurrect the defunct airline Iraqi Airways by making available 10 aircraft to the grounded carrier or flying to eight destinations in the war-torn country under its own name and with its own crews.

AUA chairman Alfred Oetsch confirmed that such a request had been made.

"But we declined," Oestsch told the Austrian news agency APA, refusing to elaborate further for reasons of confidentiality.

"The rumours are getting so absurd, I'm no longer to comment on them," Al Jaber said via a spokesman. "Responding to them will do no good either to AUA or to Austria."

Analysts insist that the collapse of the deal with Al Jaber is not a catastrophe, since AUA's future was not dependent on the Sheikh's 150 million euros.

Investors are not so sure, however.

AUA shares have shed 44 percent of their value since the beginning of the year, falling from 6.26 euros to a low of 3.45 euros at the start of May.