Austrian Airline Group's acquisition by Lufthansa became official yesterday at a ceremony in Vienna as the German company took control of more than 90% of AAG's shares and insisted that the struggling carrier must become profitable as soon as possible.

"OS has a cost problem, which we can help with in some ways with our own system," Lufthansa Chairman and CEO Wolfgang Mayrhuber said. For example, LH will handle all sales activities in Western Europe while Austrian will concentrate on sales in southeastern Europe. "AAG has to become cash neutral from today and cash positive by next year," he said. Austrian was €166.6 million ($237 million) in the red through the first half of 2009.

"We are keeping to our strategy to become Europe's leading airline group, otherwise we wouldn't have done it," Mayrhuber said of the merger. "But I didn't expect that it would take so long," to get EU clearance.

Austrian COO Peter Malanik admitted the subsidiary has a tough road ahead and that it is willing to extend cost-cutting measures if necessary. Plans for next year are underway and further details will be announced in 4-6 weeks, he revealed.

But Lufthansa is not immune to the global recession either, Mayrhuber told ATWOnline. "We aren't growing anymore," he said, warning that "only profitable jobs are secure" as LH considers possible reductions.

He said the airline likely has seen the bottom of the demand decline but, "We don't see sustainable improvement and don't expect that our yields will grow [in the near future]. We have to create our business plan according to that scenario." Asked if Lufthansa is interested in taking over any more European carriers, such as SAS Group or LOT Polish Airlines, he confirmed that appeals from troubled airlines across the continent continue, "but we don't have the management capacity, and it is also a cash issue."

LH Chief Officer-Group Airlines and Corporate Human Resources Stefan Lauer said he expects OS to be profitable eventually. "AAG will have to integrate into our system, which includes bmi, Swiss and SN Brussels," he said. The first step is to "stabilize the carrier" and stop the "bleeding," he told this website. Losses at SN and bmi must be handled as well. LH will use its merger with Swiss International Air Lines as a blueprint for its integration with OS.

Austrian CCO Andreas Bierwirth said the airline's long-haul network is showing signs of recovery and that two 767-300ERs operating under soon-to-expire leases may be replaced by two 777-200ERs.

Lufthansa paid €166 million to AAG shareholders for just under 37 million shares. It said it "will prepare to carry out all necessary steps to squeeze out the rest of the minority shareholders" and that those who have not accepted its offer at the current price may do so until Sept. 9.

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