EN Official Journal of the European Union L 59/1

COMMISSION DECISION

of 28 August 2009

on State aid C 6/09 (ex N 663/08) — Austria Austrian Airlines — Restructuring Plan

(notified under document C(2009) 6686)

(Only the German text is authentic)

(Text with EEA relevance)

(2010/137/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community, and in particular the first subparagraph of Article 88(2) thereof,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments pursuant to the above Articles (1), and having regard to those comments,

Whereas:

1. PROCEEDINGS

(1) By letter of 11 February 2009, the Commission informed the Republic of Austria of its decision to initiate proceedings under Article 88(2) of the EC Treaty with regard to the sale of the Austrian State’s shares in the Austrian Airlines Group.

(2) On 11 March 2009, Austria transmitted its comments on the opening of the proceedings to the Commission.

(3) The Commission’s decision to initiate proceedings was published in the Official Journal of the European Union (2). The Commission invited interested parties to submit their comments on the measures in question within one month of the date of publication.

(4) The Commission received comments from interested parties. It transmitted the comments to Austria by electronic mail on 15 April 2009. Austria was given the opportunity to respond to those comments. The Commission received Austria’s observations by electronic mail on 8 May 2009.

(5) At Austria’s request, meetings took place on 7 May 2009 and 18 May 2009. Those meetings were followed by the dispatch of additional information, as requested by the Commission, on 22 May 2009 and 18 June 2009.

2. DESCRIPTION OF THE FACTS

2.1. Background to the investigation

(6) The Austrian Airlines Group (hereinafter Austrian Airlines) is made up of three companies: Austrian Airlines Österreichische Luftverkehrs AG, a network carrier airline founded in 1957; Tiroler Luftfahrt GesmbH (Tyrolean Airways — hereinafter ‘Tyrolean’), a regional subsidiary established in 1978; and Lauda Air Luftfahrt GmbH (hereinafter Lauda Air), a charter division founded in 1979. Austrian Airlines is headquartered in Vienna and operates from hubs in Vienna International Airport and Innsbruck Airport. Austrian Airlines is a member of the Star Alliance.

(7) The Austrian State holds 41,56 % of Austrian Airlines shares through a State holding company, Österreichische Industrieholding AG (hereinafter ÖIAG). ÖIAG is the largest shareholder.

(8) Given the difficult — and deteriorating — financial situation in which the Austrian Airlines Group has found itself over the last few years (see Commission Decision of 19 January 2009 on State aid NN 72/08, Austrian Airlines — Rescue aid (3)), the Austrian Government issued a privatisation mandate on 12 August 2008, authorising ÖIAG to dispose of all of its shares in Austrian Airlines. On 29 October 2008, this mandate was extended until 31 December 2008.

(9) ÖIAG published announcements in the Austrian and international press (4) on 13 August 2008 inviting potential investors to express their interest in acquiring ÖIAG’s shareholding in Austrian Airlines. Bidders had until 24 August 2008 to express their interest. A total of 12 investors did so.

(10) On 28 August 2008, the potential investors were notified that an acquisition concept should be submitted by 12 September 2008. The acquisition concept had to include information on the bidder, a strategic concept for the future of Austrian Airlines, a proposal for the transaction structure, information on the planned financing and certain additional information relating to the subject matter of the contract (warranties, guarantees). Only three acquisition concepts (5) were submitted.

(11) On 16 September 2008, the three remaining bidders were invited to submit their final offers without a purchase price by 21 October 2008 and their final offers with the purchase price by 24 October 2008.

(12) On 21 October 2008, Deutsche Lufthansa AG (hereinafter Lufthansa) was the only bidder to submit an offer, including a contract and strategic concept, without a price as had been requested. On 24 October 2008, Lufthansa submitted a binding offer indicating the price it was prepared to pay for ÖIAG’s shareholding in Austrian Airlines.

(13) On 24 October 2008, S7 also submitted an offer […] (6). Air France/KLM made no offer (7).

(14) The transaction was approved by Lufthansa’s Supervisory Board on 3 December 2008 and by ÖIAG’s Supervisory Board on 5 December 2008.

(15) Thus, at the end of the privatisation process, Lufthansa, as the selected bidder, made an offer for ÖIAG’s shareholding in Austrian Airlines which was accepted by ÖIAG’s Supervisory Board.

(16) The transaction concluded between ÖIAG and Lufthansa stipulates that: — Lufthansa is to pay ÖIAG a purchase price of EUR 366 268,75, — ÖIAG is to receive a debtor warrant (8) which may lead to entitlement to an additional payment of up to EUR 162 million, — through a special purpose vehicle, ÖIAG is to pay an amount of EUR 500 million, which Lufthansa is to use for a capital increase in Austrian Airlines.

(17) When notifying the measure for reasons of legal certainty on 21 December 2008, the Republic of Austria expressed the opinion that the sales transaction does not involve State aid because the price to be paid for Austrian Airlines is the market price for the company.

(18) In any case, the price to be paid by Lufthansa for the State’s participation in Austrian Airlines does not constitute State aid because any alternative scenario would have resulted in higher costs for ÖIAG.

(19) Additionally, and without prejudice to the above arguments, the Austrian authorities stated that, in the event of the Commission not accepting that the measures in question did not amount to State aid, they would also submit a restructuring plan for Austrian Airlines, so that the aid would be compatible under Article 87(3)(c) of the EC Treaty.

(20) With regard to rescue aid, the Republic of Austria notified the Commission on 19 December 2008 of its decision to grant rescue aid to the Austrian Airlines Group in the form of a 100 % guarantee, in order to enable the company to receive loan financing amounting to EUR 200 million. The rescue aid was approved on 19 January 2009.

(21) In accordance with the rescue aid decision, the rescue aid (in the form of a State guarantee for a framework credit agreement) will be brought to an end when the Commission reaches a definitive State aid position (final decision) on the sale process/restructuring plan submitted by the Austrian authorities (9).

2.2. Measures under investigation

(22) The decision to open the formal investigation (hereinafter the decision to initiate proceedings) raised the following questions: — whether the sales price achieved for the Austrian State’s shareholding in Austrian Airlines is the market price, — whether ÖIAG acted as a market economy investor in accepting a negative price (10), as any alternative scenario would have resulted in higher costs, and — whether, if State aid is involved, this aid is restructuring aid compatible with the common market.

2.2.1. The market price of ÖIAG’s shareholding in Austrian Airlines

(23) The Commission expressed doubts as to whether the price to be paid by Lufthansa for the shares it is buying reflects the market price, given the conditions attached to the sale. The privatisation mandate given to ÖIAG stated that: ‘ÖIAG is authorised to privatise Austrian Airlines AG, ensuring an Austrian core shareholder structure of 25 % plus one share. The aim is to: 1. retain the trade mark “Austrian”; 2. keep the headquarters in Austria; 3. retain a transport network appropriate for the location and pay due regard to Austria as a centre for business and employment; 4. preserve as many secure jobs as possible at Austrian Airlines and Vienna airport; and 5. establish a committee to protect Austria’s interests as a location’.

(24) The price to be paid to the Austrian State will be supplemented by an ‘earn out’ clause allowing the Austrian State to be paid from possible future profits. The Commission wanted to gain a better understanding of this mechanism and its value.

(25) When opening the investigation, the Commission expressed doubts as to whether the sale of Austrian Airlines took place under appropriate conditions. The Commission also indicated that it could not definitively determine whether the conditions attached to the sale were such as to have an influence on the price paid.

(26) In relation to the price paid by Lufthansa, the Commission stated that it was unable to establish definitively whether the warrant for the sum of EUR 162 million could adequately compensate the Austrian State for the lower price per share it is willing to accept when concluding the sale or whether, by accepting a price per share that is considerably lower than the price to be paid to the other shareholders, the State is not in fact granting State aid to Lufthansa and thereby to Austrian Airlines.

(27) With respect to the negative price to be paid by Lufthansa, and as set out in the complaint made by Air France/KLM, it is not clear whether all bidders were afforded the same opportunity to make bids on the same terms. Nor was it clear that all bidders were given enough time and information to be able to value the assets for sale. The Commission also noted that the price to be paid by Lufthansa for the shares it will buy from the State is different from (i.e. lower than) the price to be paid to the floating shareholders.

2.2.2. ÖIAG acted as a market economy investor, as any other scenario would have resulted in higher costs

(28) The Austrian authorities submitted that, if ÖIAG had not sold its shareholding, it would have been faced with one of three possible scenarios, all resulting in higher costs. — Liquidation of Austrian Airlines: ÖIAG would bear the costs (estimated at up to EUR […]) arising from a controlled liquidation of Austrian Airlines. — Insolvency of Austrian Airlines: ÖIAG does not support Austrian Airlines, resulting in the insolvency of the company. Direct and indirect costs in excess of the net-costs of the privatisation would then arise for ÖIAG. — Restructuring of Austrian Airlines on a stand-alone basis: ÖIAG finances the restructuring of Austrian Airlines to allow it to operate on a stand-alone basis.

(29) In opening the investigation, the Commission expressed doubts as to whether the option chosen by the State was the action of a market economy investor. It did not have enough information at its disposal, either regarding the liquidation costs that would have had to be borne in the event of a winding-up of the company or regarding the costs and losses that ÖIAG would have incurred in the event of insolvency. Nor did it have sufficient information to be able to evaluate the stand-alone option.

(30) The Commission pointed out that, in general, it does not accept that a shareholder is automatically obliged to meet costs arising from the insolvency or liquidation of a company. The considerations concerning the social and economic consequences of a failure by ÖIAG to support Austrian Airlines appeared to result from the fact that ÖIAG is a State holding company. In addition, the Commission noted that the reasoning of the Austrian authorities is also dependent on the price paid by the selected bidder having been the highest possible price.

2.2.3. The restructuring plan submitted for Austrian Airlines

(31) Having concluded that it could not exclude the existence of State aid, the Commission was obliged to examine the restructuring plan in the light of the applicable legislation, namely the Community Guidelines on State aid for rescuing and restructuring firms in difficulty (11) (hereinafter the 2004 Guidelines) and the Commission Notice on the application of Articles 92 and 93 of the EC Treaty and Article 61 of the EEA Agreement to State aids in the aviation sector (12) (hereinafter the 1994 Aviation Guidelines).

(32) These guidelines set out a number of conditions under which restructuring aid can be granted. In opening the proceedings, the Commission expressed doubts as to whether the conditions relating to the eligibility of the firm, the restoration of long-term viability, the aid amount, the compensatory measures and the level of own contribution have been complied with.

3. COMMENTS FROM AUSTRIA

(33) The Austrian authorities began their observations by providing background information on and a description of the privatisation process. In accordance with Community law, the privatisation process was open and fully publicised, and all bidders were treated equally throughout all phases of the process. Although the privatisation process was conducted to a tight schedule, the Austrian authorities are of the opinion that all bidders had sufficient time to obtain all necessary information and were in a position to prepare a final offer based on that information.

3.1. Conditions imposed on the privatisation

(34) In relation to the conditions imposed by the privatisation mandate, the Austrian authorities made a distinction between ‘best effort aims’, i.e. (i) retaining a transport network appropriate for Austria; and (ii) preserving as many jobs as possible; and ‘binding aims’, i.e. (iii) retaining the trade mark ‘Austrian’; (iv) keeping the headquarters in Austria; (v) creating a committee to protect Austria’s interests; and (vi) ensuring an Austrian core shareholder structure of 25 % plus one share.

(35) The Austrian authorities further state that at no time did any of the bidders contest whether these aims could be implemented or argue that they would constitute ‘conditions’ that would affect the purchase price.

(36) In its decision to open the formal investigation, the Commission, in line with past decisions (13), stated that, with regard to (i) ‘retaining a transport network appropriate for Austria’ and (iii) ‘retaining the trade mark “Austrian” ’, it could be concluded that these conditions did not have any negative impact on the purchase price.

3.1.1. Preservation of as many jobs as possible

(37) The Austrian authorities submit that this condition should not raise any concerns. The contractual documentation submitted by ÖIAG to the bidders did not contain any obligations in this respect. They pointed out that, in previous decisions, the Commission has stated that non-discriminatory conditions requesting buyers to preserve jobs are admissible (14). Any impact on the purchase price is ruled out, as this is only a non-discriminatory ‘best efforts’ clause and is not legally binding (15).

3.1.2. Keeping the headquarters in Austria

(38) One aim stipulated in the privatisation mandate was to keep the headquarters of Austrian Airlines in Austria. The Austrian authorities argue that, in order to obtain an operating licence, the registered office must be located in the Member State in which the licence was issued (16). If the headquarters or the registered office of Austrian Airlines is relocated outside Austria, this would result in the loss of the operating licence. Consequently, under Community law (Regulation (EC) No 1008/2008) and Austrian law (the Aviation Act), Austrian Airlines would no longer be able to continue its aviation operation (17).

(39) Bilateral aviation agreements also require the headquarters to remain in Austria: the validity of the agreements is linked to a valid operating licence. To continue the business operation of Austrian Airlines, it is therefore necessary to retain its headquarters in Austria.

(40) The Austrian authorities state that, in the case of previous mergers in the aviation sector (SWISS/Sabena and Air France/KLM), comparable models were chosen to obtain an operating licence. The model is therefore a structure known and accepted in the sector. Given the legal framework, none of the bidders for Austrian Airlines questioned that the headquarters should remain in Austria and this fact was therefore taken into account accordingly in the acquisition concepts and had no influence on the purchase price.

3.1.3. Ensuring an Austrian core shareholder structure of 25 % plus one share

(41) The Austrian authorities point out that this condition was based on the requirements of bilateral aviation agreements as provided for by Austrian law.

(42) Retaining take-off, landing and route rights under bilateral aviation agreements is, in many cases, linked to the exercise of substantial ownership rights and effective control by persons of a certain nationality. For an Austrian-registered airline, substantial ownership means that Austrian citizens or Austrian undertakings must own the majority of the airline for the bilateral aviation agreements to remain applicable. If Austrian majority ownership no longer exists, the third country may revoke the take-off, landing and route rights.

(43) Section 9(2) of the ÖIAG Act states that ÖIAG must retain such influence within the framework of the management of its shareholding to allow it, either on the basis of holding a stake of 25 % plus one share in the voting share capital or on the basis of rights or contracts with third parties, to participate in decisions taken by the General Assembly, which, under the Stock Corporation Act, require at least a three-quarters majority.

(44) On the basis of the privatisation mandate, ÖIAG was faced with a choice between reducing its shareholding in Austrian Airlines to 25 % plus one share and accepting a transaction structure from bidders which would guarantee an Austrian core shareholder structure of 25 % plus one share. Accordingly, at the meetings that took place with the bidders, they were invited to propose such transaction structures. None of the bidders raised fundamental objections to the structure.

(45) Austria is of the opinion that the takeover of Austrian Airlines by non-Austrians would result in the cancellation of certain bilateral agreements and therefore in the loss of take-off and landing rights and flight rights for routes operated by Austrian Airlines under those international agreements. Austrian Airlines’ business model, which is based on transport routes to non-Community countries in Central and Eastern Europe, as well as countries in the Middle East and Central Asia, means that such bilateral agreements are of essential economic importance.

(46) However, as the privatisation mandate provided for the divestiture of all of ÖIAG’s shares, it was only on the basis of the transaction structure proposed by all bidders (an Austrian registered private foundation) that ÖIAG was able to sell its shares in Austrian Airlines while retaining, for the airline, the valuable traffic rights in question and carrying out a complete privatisation. The Austrian authorities are of the opinion that requiring an Austrian core shareholder structure was essential in order to retain key rights and had no impact on the price achieved. The solution put in place to address this issue is similarly cost neutral.

3.1.4. Creating a committee to protect Austria’s interests

(47) The Austrian authorities submit that this type of committee, which is not involved in the decision-making processes of Austrian Airlines, is commonly found in the industry and has never yet been objected to by the Commission in comparable cases (18). There can be no influence on the purchase price, as the body in question has only an advisory character and has no de jure or de facto influence on the company. In particular, the body has no veto or codetermination rights. Furthermore, the requirement for such a committee to be set up was not raised as problematic by any of the bidders in the privatisation process.

3.2. The purchase price corresponds to the market price

(48) In Austria’s opinion, the purchase price is the result of a privatisation process carried out in accordance with the requirements set out in the Commission’s XXIIIrd Competition Report (19) and the 1994 Guidelines. The shares held by ÖIAG in Austrian Airlines were sold to the highest bidder at the end of a competitive tendering procedure.

(49) The Austrian authorities submit that, in the current economic situation, only a negative purchase price could be achieved.

(50) In addition to the shares to be bought from the State, Lufthansa wishes to buy the free float to take control of the whole undertaking. The price of the free float in such a takeover offer is legally determined under the Austrian Takeover Act.

(51) In the opinion of the Austrian authorities, the valuation of the State’s shareholding must be seen in the light of the total purchase price of the transaction, which is made up of the purchase price achieved by ÖIAG in the bidding process and the costs of the takeover of the free float in accordance with the law. The Austrian Takeover Act stipulates that the takeover price must correspond to at least the average stock market price for the stock concerned, weighted according to the respective trading volumes, over the six months preceding the day on which the intention to submit an offer was publicly announced (20). The takeover price offered by Lufthansa to the free-float shareholders is EUR 4,49 and is thus in line with the requirements of the Austrian Takeover Act.

(52) In the opinion of the Austrian authorities, the takeover price in the takeover offer is distorted. It does not reflect the true economic value of Austrian Airlines but results from the provisions of the Takeover Act (21). This is apparent from the price development of Austrian Airlines shares since the beginning of 2008. Before the privatisation mandate was issued on 12 August 2008, the share price was below EUR 3,00, and it was not until the beginning of September that the price rose above EUR 7,00. The share price of Austrian Airlines then fell sharply again, and, for weeks now, has been well below Lufthansa’s takeover price of EUR 4,49 per share. These large fluctuations in Austrian Airlines’ share price are the result of speculation, and there is no correlation whatsoever with the actual value of the company.

(53) Another reason why Lufthansa had to make an attractive offer to the floating shareholders was that Lufthansa is aiming to obtain full control of Austrian Airlines. Lufthansa intends to acquire 90 % of Austrian Airlines, as reaching this threshold will enable a ‘squeeze out’ and hence a takeover of 100 % of the business shares. It would be easier for Lufthansa to implement its plans as sole shareholder, as the decision-making process would be easier. Furthermore, Lufthansa would retain all the benefits of its planned investments.

(54) The Austrian authorities point out that selling at a negative purchase price is permissible under Community law. The Commission has confirmed in several decisions (22) that a ‘symbolic’ or ‘negative’ purchase price that is the result of a privatisation process complying with the requirements of the XXIIIrd Competition Report or is based on a value appraisal is not deemed to be State aid.

(55) In the opinion of the Austrian authorities, the price offered by Lufthansa is the maximum achievable market price. It should also be remembered that both Lufthansa and Austrian Airlines are members of the Star Alliance. Bidders that are not part of the Star Alliance (Air France/KLM and S7) would therefore have had to factor the additional cost of changing alliance into their offer. The Austrian authorities submit that these costs could amount to EUR […].

(56) The Austrian authorities go on to state that the offer submitted by S7 (although not binding) foresaw a […] price. They stress that, based on past Commission decisions (23), a competitor’s offer constitutes a good benchmark for calculating the market value of a company.

(57) In relation to the debtor warrant, the authorities explain that the maximum disbursement amount under the warrant is EUR 164,1 million, made up of […] (24).

3.3. ÖIAG acted as market economy investor

(58) In the opinion of the Austrian authorities, ÖIAG’s decision to sell Austrian Airlines for a negative purchase price would also have been taken by a private investor (25) guided by the prospects of longer term profitability, as the negative purchase price was significantly less costly than the alternative scenarios. The insolvency of Austrian Airlines would have led to significant losses in the value of other holdings of the Republic of Austria. Furthermore, ÖIAG would have had to bear the costs of a social plan. The other conceivable alternative scenarios, i.e. a controlled winding-up of Austrian Airlines or continuation on a stand-alone basis, would also have led to costs higher than the negative purchase price.

3.3.1. Costs relating to the insolvency of Austrian Airlines

(59) In the opinion of the Austrian authorities, the costs incurred by ÖIAG as a result of the insolvency of Austrian Airlines would have been considerably higher than the negative purchase price. The insolvency of Austrian Airlines could have provoked a massive drop in the value of other State holdings. The Austrian authorities cite an analysis conducted by Merrill Lynch, according to which the insolvency of Austrian Airlines could have resulted in the deterioration of the ratings of other State-owned ‘sister companies’, leading to higher refinancing costs and share price losses. The ‘sister companies’ would be affected by an expected downgrading of their ratings regardless of the fact that ÖIAG has only a minority shareholding in Austrian Airlines (26).

(60) Such share price losses do not stem from legal or voluntarily assumed obligations but are direct consequences of the insolvency of Austrian Airlines. The Austrian authorities are therefore of the opinion that a private investor would also provide a subsidiary with capital if the share price losses to be expected exceed the costs incurred by avoiding the insolvency of that subsidiary.

(61) According to the analysis conducted by Merrill Lynch, such losses in value could amount to approximately EUR […] for ÖIAG’s holdings (OMV AG, Post AG, Telekom Austria AG) alone. […] In view of the above, it is likely that the overall share price losses for the beneficial owner, namely the Republic of Austria (EUR […]), would greatly exceed the negative purchase price.

(62) The Austrian authorities argue that rating agencies stress the fact that subsidiaries’ credit ratings benefit from the ownership support of their private parent company. The example they provide is the fact that Hypovereinsbank’s rating was increased by three notches to reflect its 100 % ownership by UniCredit. In addition, they provide further examples of cases in which a rating downgrade of the parent company has led to a corresponding downgrade for its subsidiaries (see table below). Table 1 Examples of rating downgrades for subsidiaries following a rating downgrade of a parent company Parent company Subsidiary Date Rating downgrade (Standard & Poor’s) Parent company Subsidiary Postbank BHW Bausparkasse 22 June 2007 from A to A– from A– to BBB+ Post Postbank 22 June 2007 from A to A– from A to A– UniCredit Bank Austria 18 March 2009 from A+ to A from A+ to A UniCredit Hypovereinsbank 18 March 2009 from A+ to A from A+ to A

(63) […]

(64) As ÖIAG and its holding companies — Telekom Austria AG, Österreichische Post AG and OMV AG — are widely known in Austria, any impact on industrial peace and brand image would be far-reaching. A private investor finding itself in ÖIAG’s position would therefore assume the costs of a social plan in the event of Austrian Airlines becoming insolvent, even if it were under no legal obligation to do so.

(65) In the opinion of the Austrian authorities, the cost of a hypothetical social plan corresponds to the amount that would arise under this heading in the event of liquidation. On the whole, the employees would therefore not be worse off than in the event of an orderly liquidation with a social plan.

(66) The Austrian authorities estimate these voluntary social costs as EUR […] for the Austrian Airlines Group (Austrian Airlines EUR […] and Tyrolean EUR […]) after deduction of the payments made by the Austrian Insolvency Remuneration Fund (see table below). Table 2 Employee-related liabilities to be assumed by ÖIAG in the event of insolvency of the Austrian Airlines Group (in EUR million) Employee-related liabilities in the event of insolvency of the Austrian Airlines Group Austrian Airlines AG Tyrolean Austrian Airlines Group Severance payments in accordance with legal obligations and collective bargaining agreements […] […] […] Pensions […] […] […] Accrual of annual leave […] […] […] Other employee-related costs […] […] […] Social plan […] […] […] Pension claims […] […] […] Total employee-related liabilities […] […] […] Payments by the Austrian Insolvency Remuneration Fund […] […] […] Total liabilities to be assumed by ÖIAG […] […] […]

3.3.2. Costs of an orderly winding-up of Austrian Airlines

(67) In this regard, the Austrian authorities estimate the total liquidation costs to be in the region of EUR […], of which some EUR […] (estimate based on the average employee-related liabilities) relate to the social plan for former employees. Other costs would result from the dissolution of agreements, of which […]. Agreements relating […] would also have to be brought to a premature end.

3.3.3. Cost to be borne by ÖIAG for restructuring on a stand-alone basis

(68) If Austrian Airlines were to find itself having to operate on a stand-alone basis, the Austrian Government estimates that the company would have to expect […] operating result in 2009, primarily because of a sharp drop in demand as a result of the economic crisis.

(69) The company’s immediate problem would be the unavailability of liquidity. In addition to minimum liquidity reserves of EUR […] to manage […], Austrian Airlines would also require additional liquidity for restructuring measures, as well as for […]. It should be noted in this respect that at the end of 2008 the liquidity holdings of Austrian Airlines were only in the […] range.

(70) The stand-alone concept is based on a […], where only two to three destinations would be retained. As a result, […]. This would result in one-off write-downs of EUR […]. Furthermore, the workforce would be reduced by […] full-time positions. The one-off social plan costs are estimated at EUR […].

(71) The result is a loss of sales revenue of approximately EUR […] in 2009, which would have a negative impact on cash flow. In the opinion of the Austrian authorities, the stand-alone concept would result in a liquidity shortfall of EUR […] over the period 2009-11 (27).

3.3.4. Conclusion

(72) For the Austrian authorities, the sale of the shareholding in Austrian Airlines for a negative purchase price was the most cost-effective alternative. Since Austria opted for the most cost-effective alternative, it acted as a private market economy investor.

3.4. The restructuring plan for Austrian Airlines

3.4.1. Austrian Airlines is a company in difficulty

(73) The Austrian authorities are of the opinion that Austrian Airlines is a company in difficulty within the meaning of the 2004 Guidelines, as Austrian Airlines would have become insolvent at the end of December 2008 if no rescue aid had been granted. The rescue aid guaranteed the viability of Austrian Airlines for the next six months. However, in order to guarantee long-term viability and a sustainable reorganisation of the enterprise, restructuring of the company is absolutely vital. If the restructuring plan is not approved, Austrian Airlines faces a direct threat of insolvency.

(74) The Austrian authorities go on to state that Austrian Airlines is an independent undertaking whose difficulties arise from the company itself and the special situation of the aviation sector. The Government’s decisions regarding the grant and the agreements signed between ÖIAG and Lufthansa stipulate that Austrian Airlines and not Lufthansa is the beneficiary of the grant. Consequently, the grant is made to Austrian Airlines. Under State aid law, Lufthansa is not the beneficiary of the State aid in the event of a takeover of Austrian Airlines.

(75) They further state that Austrian Airlines will not be part of the Lufthansa Group until the sale has been closed, so point 13 of the 2004 Guidelines does not apply. The question of whether Lufthansa could have financially rehabilitated Austrian Airlines using its own capital is therefore moot. Nor can any group relationship be said to exist between Lufthansa and Austrian Airlines on the basis, for example, of existing cooperation within the Star Alliance. The Star Alliance is a platform for cooperation between 24 airlines and does not constitute a group relationship.

(76) In the opinion of the Austrian authorities, the transaction would not result in an appreciable impairment of competition. This is apparent primarily from the fact that Lufthansa and Austrian Airlines already cooperate to a significant extent. In addition to their cooperation within the Star Alliance, they operate a joint venture for traffic between Germany and Austria which seeks to optimise these routes and also includes the sharing of costs and profits.

3.4.2. Cost savings and synergies resulting from the restructuring plan

(77) Although Lufthansa and Austrian Airlines already cooperate within the Star Alliance and operate a joint venture, the Austrian authorities feel that further cost reductions and sales revenue growth could be achieved. This is based on the fact that equity participation leads to significantly greater integration between enterprises in the aviation sector, both economically and under corporate law, resulting in substantially higher cost savings than in the case of partnerships without equity participation, which are limited to coordinating certain aspects of the business or to joint-venture activities. The authorities refer to expert studies that estimate cost savings to be about 1,9 % for purely coordinating partnerships, while joint operational activities result in savings of about 5,6 % of overall costs. However, cooperation that is underpinned by equity participation results in cost savings of approximately 11,4 % (28).

(78) The takeover of Austrian Airlines by Lufthansa would also yield cost savings through […]. Other substantial cost savings would result from savings potential […].

(79) Achievable cost synergies in addition to the existing cooperation are estimated by Lufthansa to be approximately EUR […] a year. There would also be revenue synergies of approximately EUR […] a year, resulting in particular from […]. Overall, the additional synergies would come to about EUR […] a year.

3.4.3. The aid amount is reasonable

(80) In the opinion of the Austrian authorities, the sum of EUR 500 million represents the minimum amount needed to restore the long-term profitability of Austrian Airlines. Without the grant, which will be used to reduce Austrian Airlines’ liabilities, […].

3.4.4. Compensatory measures

(81) In the opinion of the Austrian authorities, there is no need for compensatory measures within the meaning of the Rescue and Restructuring Guidelines. In this regard, the Austrian authorities refer to point 38(3) of the 1994 Guidelines, according to which a restructuring programme must include the reduction of capacity if the restoration of financial viability and/or the market situation so require. Given that the 1994 Guidelines are a lex specialis for the aviation sector, they should take precedence over the requirements of the 2004 Guidelines. In the case at hand, the Austrian authorities argue that neither the restoration of financial viability nor the market situation require compensatory measures beyond the steps already planned within the scope of the restructuring.

(82) In any event, the capacity reductions introduced as part of the ‘Go4Profit’ programme, initiated in 2006, already constitute a significant compensatory measure. Furthermore, the restructuring plan provides for other measures that constitute substantial compensatory measures, as set out in the opening of the proceedings. The Austrian authorities are of the opinion that the compensatory measures already implemented by Austrian Airlines, as well as those planned for the future, constitute a compensatory package that is at the upper end of what the Commission has required in other restructuring cases in the past. This is all the more applicable given that Austrian Airlines is a mid-size airline and, in accordance with point 40 of the 2004 Guidelines, the compensatory measures must be proportionate to the size of the enterprise.

3.4.5. Own contribution

(83) In this regard, the Austrian authorities point out that the restructuring costs of Austrian Airlines (without the rescue aid of EUR 200 million, which must be repaid after the takeover has been completed) amount to approximately EUR […]. They are summarised in the table below. Table 3 Restructuring costs of Austrian Airlines according to the Austrian authorities Measure Restructuring costs (EUR million) Own contribution (EUR million) Contribution of the Republic of Austria (a) Financial restructuring […] […] […] (b) Austrian Airlines’ ‘Go4Profit’ programme […] […] […] (c) Costs necessary to achieve synergies […] […] […] (d) Consultancy and transaction costs […] […] […] (e) Higher refinancing costs due to the financial crisis […] […] […] Total amount […] […] (Level of own contribution: 55,5 %) […]

(84) Austrian Airlines’ level of debt (EUR […] in 2008) is significantly higher than that of Lufthansa […]. The costs have been estimated at EUR […].

(85) There will be additional costs of EUR […] for restructuring measures in order to achieve the annual synergy effects envisaged in the restructuring plan. It is argued that the costs of the ‘Go4Profit’ programme, amounting to EUR […], for the restructuring measures already undertaken by Austrian Airlines should also be counted, as this is a still ongoing process.

(86) To these sums must be added transaction costs of EUR […] and higher refinancing costs of EUR […] as a result of the financial crisis.

4. COMMENTS FROM THIRD PARTIES

4.1. Austrian Airlines

(87) Austrian Airlines’ comments were submitted by letter of 13 April 2009 and were fully in line with those of the Austrian authorities.

(88) As regards the voluntary payment of social costs in the event of insolvency, Austrian Airlines emphasises that such payments by the controlling shareholder may be imperative for image reasons and in order to prevent social and industrial unrest within ‘sister companies’. Austrian Airlines also explains that a specific form of social partnership (Sozialpartnerschaft) between employers and employees’ representatives is typical in Austria. This social partnership obliges an employer to pay for social plans and provide for further voluntary compensation of social costs even where it is not legally bound to do so. Furthermore, Austrian Airlines argues that the estimated cost of the social plan, EUR […] for 7 914 employees, is below comparable costs. For Austria Tabak, the cost was EUR […] per employee in 2005 and as much as EUR […] per employee in 2009. Austrian Airlines also gives examples of social plan costs assumed voluntarily in cases of closure/liquidation of subsidiaries and/or production units in Austria. Table 4 Examples of social plan costs assumed voluntarily in cases of closure/liquidation of subsidiaries and/or production units in Austria Company Year Employees Compensated social cost Eurostar Automobilwerk GmbH und Co. KG from 1995 150 Social plan […] Semperit Reifen GmbH 1997-2002 1 000 Employment foundation and social plan […] Philips, closure of the factory in Lebring 1999-2000 200-300 Social plan […] Elektra Bregenz 2003 234 Severance payments and social plan […] Legrand Austria 2003-04 150 Social plan […] Verbund, closure of the Voitsberg IV power station 2004 220 Employment foundation and additional severance payments […] Phelps Dodge Magnet Wire Austria 2004-05 55 Social plan […] Austria Tabak 2005 220 Severance payments and employment foundation […] Austria Tabak 2009 269 Severance payments and employment foundation […] Thonet-Vienna, closure of the factory in Friedberg 2006 25 Additional severance payments […] AT & S 2007 35 Social plan […]

(89) As private holding companies voluntarily assume a certain level of social costs when they close business divisions or production units, Austrian Airlines is of the opinion that the level of social costs ÖIAG would have to assume voluntarily in the event of insolvency is equal to those arising in the event of structured liquidation. Table 5 Average social cost estimates of Austrian Airlines AG (without Tyrolean) (in EUR million) Social cost Minimum amount Maximum amount Severance payments […] […] Accrual of annual leave […] […] Pension scheme […] […] Social plan […] […] Total […] […]

(90) Austrian Airlines explains that the severance payments (EUR […]) relate to the obligations laid down by law or by collective agreements as at 30 June 2009, including a EUR […] estimate for employees outside Austria. The large difference between the minimum (EUR […]) and maximum amount (EUR […]) of social costs compensated within the pension scheme is due to […]. The lower estimate of EUR […] for pension costs is based on the assumption that […] is to be financed. The upper estimate of EUR […] covers the (not unlikely) scenario of employees exercising […].

(91) Although Austrian Airlines acknowledges that the estimated social costs are at the […] end of the usual social compensation in Austria, they submit that there are factors to justify this amount. Firstly, the length of time served by Austrian Airlines’ staff is high, averaging […] years for pilots and […] years for commercial and technical staff and flight attendants. Secondly, any remuneration under a social plan for this company would be influenced by the […] average salary of pilots and other staff compared with workers in other sectors. The average monthly salary of Austrian Airlines’ cockpit crew (2009 level) is EUR […], while the monthly salary of commercial and technical staff and flight attendants is between EUR […] and EUR […]. Furthermore, Austrian Airlines considers itself to be one of Austria’s key companies, and its insolvency would attract a lot of media attention.

(92) In the liquidation scenario, Austrian Airlines would expect liquidation costs of between EUR […] and EUR […]. Table 6 Liquidation scenario for Austrian Airlines (in EUR million) Costs Lower value Upper value Sale of aircraft […] […] Repayment of aircraft financing […] […] Social costs […] […] Termination of long-term contracts […] […] Remaining costs and proceeds (netted) […] […] Total cost […] […]

4.2. Lufthansa

(93) Lufthansa began its observations of 9 April 2009 by stating that the economic parameters of the transaction have changed significantly since it made its bid to acquire Austrian Airlines in October 2008. These changes reflect Austrian Airlines’ structural problems, as well as the changes in the economic environment, which has dramatically deteriorated since then. The sub-prime crisis has developed into the worst financial crisis for decades, leading to a severe real-economy recession.

(94) Lufthansa expects the European markets to remain in recession in 2009, possibly 2010 and maybe even longer, with a corresponding effect on the business and planned restructuring of Austrian Airlines. Having said this, Lufthansa is of the opinion that the planned restructuring can restore the long-term viability of Austrian Airlines, with break-even depending in particular on the length and depth of the recession. As things stand, it is apparent that Austrian Airlines will continue to sustain […].

(95) As regards the price to be paid, Lufthansa states that the conditions set in the privatisation mandate had no impact on the price it was willing to pay for Austrian Airlines. Furthermore, these conditions did not deter bidders from participating in the tender process when compared with a private auction.

(96) Lufthansa also argues that the difference between the price offered to the floating shareholders and the price to be paid to ÖIAG does not involve State aid. The price to be paid to ÖIAG is made up of a fixed price of EUR 366 268,75 and a debtor warrant (Besserungsschein) whose value depends on the operational performance of Austrian Airlines and the price development of Lufthansa shares. The maximum payment under the debtor warrant is EUR 4,48 per share. The price to be paid to the floating shareholders is determined by Section 26 of the Austrian Takeover Act and is EUR 4,49 per outstanding share.

(97) Lufthansa stated that it would make no economic sense to oblige the highest bidder to offer a price corresponding to the share price. If the State had chosen to offer all of its shares on the stock exchange, the share price would have plummeted. The minimum takeover bid price is based on an average of historical share prices (see above). It therefore does not necessarily reflect the real value of the shares, either at the time of the takeover bid itself or at the time of privatisation.

(98) Accordingly, the maximum price per share paid to ÖIAG (fixed price plus the minimum amount under the debtor warrant) corresponds to the price per share paid to the other shareholders under the takeover bid. Although ÖIAG may be receiving a lower price per share than other shareholders for its stake in Austrian Airlines, this does not amount to State aid, as the price paid to ÖIAG corresponds to the market value. Lufthansa states that it was the only undertaking in the sales process to submit a valid final bid. By definition, Lufthansa is therefore the highest bidder. The result of an open tender sales process must be assumed to be the market price.

(99) As regards the restructuring plan, Lufthansa argues that the 1994 Aviation Guidelines and the 2004 Guidelines should be applied in parallel. When calculating the business plan, the deterioration in the economy and the aviation markets was taken into account as far as could be predicted. […] However, Austrian Airlines’ long-term viability can be restored only if the revised restructuring plan — and further cost-cutting measures yet to be negotiated — can be implemented as envisaged and thereby bring about the necessary cost reductions.

(100) Lufthansa submits that the restructuring aid amount (EUR 500 million) is the absolute minimum required to re-establish the long-term viability of Austrian Airlines. Further deterioration in the Austrian and global aviation markets has […].

(101) Regarding compensatory measures, Lufthansa stresses the fact that Austrian Airlines has already significantly reduced its capacity over the last few years. […].

(102) Regarding the requirement for a significant own contribution, as set out in point 43 et seq. of the 2004 Guidelines, Lufthansa notes that this is not reflected in the 1994 Aviation Guidelines. Lufthansa therefore doubts that this criterion is a legal requirement for restructuring in the aviation sector. In any event, Lufthansa submits that Austrian Airlines and Lufthansa will bear a considerable share of the overall restructuring costs, amounting to some EUR […] or approximately 68 % of the total restructuring costs of EUR […].

4.3. Ryanair

(103) Ryanair operates 11 routes between 4 Austrian airports (Salzburg, Linz, Graz and Klagenfurt) and destinations in other EU countries, including Germany. Ryanair states that it is therefore a competitor of both Austrian Airlines and Lufthansa.

(104) Ryanair began its observations of 9 April 2009 by stating that, in its opinion, the initiation of formal investigation proceedings was justified, but the Commission’s call for comments provided insufficient data. The non-publication of information considered confidential by the Austrian authorities constituted a procedural flaw.

(105) On the substance of the case, Ryanair is of the opinion that the Austrian authorities have not demonstrated that, from the point of view of a market economy investor, the sale of Austrian Airlines, combined with a cash injection of EUR 500 million, is preferable to its liquidation. In Ryanair’s opinion, a market economy investor would have preferred the voluntary winding-up or judicial liquidation of Austrian Airlines, or a straight share deal with no preconditions regarding a massive cash injection, to the solution chosen by the Austrian Government. This is demonstrated by the fact that Austrian Airlines’ private shareholders were not prepared to subscribe (in proportion to their shareholding) to the capital increase.

(106) As regards the reasons put forward by the Austrian authorities for not opting for liquidation, in so far as these relate to concerns about the reputation and image of the State-owned holding ÖIAG, Ryanair doubts whether such reasoning could be the primary, or indeed the only, motivation for major business decisions by such an investor.

(107) Ryanair also calls into question whether the price offered by Lufthansa is the market price. In the opinion of Ryanair, the process that led to the selection of Lufthansa as the buyer was not competitive, the deadline for the submission of bids was extremely short (from 13 to 24 August 2008) and Lufthansa, which had prior knowledge of Austrian Airlines’ operations through its participation in the Star Alliance and in joint ventures, had an advantage over other possible buyers. By imposing conditions on the sale, the Austrian authorities confused their role as the State and their role as an economic operator.

(108) Even if some of those conditions could be considered ‘soft’ conditions, they would still not have been imposed by a market economy investor, as they entail a cost. Potential bidders would take them seriously and either be discouraged from bidding or lower their price below the market price to factor in the cost of compliance.

(109) Ryanair submits that its expansion in Austria has been hindered by Austrian Airlines’ loss-making presence in the market and its ability to sustain below-cost prices over a long period of time. State aid to Austrian Airlines would deprive Ryanair of opportunities for expansion and shift the burden of structural adjustment away from Austrian Airlines to competitive market operators such as Ryanair. Once Austrian Airlines has been integrated into the Lufthansa network, it will start feeding traffic into Lufthansa’s Frankfurt and Munich hubs, creating a risk of foreclosure, at least on the routes between Austria and Germany.

4.4. Air France/KLM

(110) Air France/KLM began its observations of 14 April 2009 by regretting that the Commission had not carried out a more detailed evaluation of the structure of the sales process. Air France/KLM points out that, at the start of the process in August 2008, it was a question of privatisation without Austrian Airlines needing to be restructured.

(111) […]

(112) Air France/KLM is of the opinion that the restructuring proposed by Lufthansa is not a real plan and therefore cannot justify the granting of State aid. In addition, the ability of the Lufthansa Group to implement these same restructuring measures using its own resources needs to be considered.

(113) Air France/KLM states that the tender process as implemented did not meet the requirements of the 1994 Aviation Guidelines. It states that the privatisation process initiated on 13 August 2008 was not conducted in a transparent and non-discriminatory manner.

(114) Air France/KLM participated in the privatisation process and […].

(115) The tender required bidders to make all shareholders an equivalent offer of the price they were prepared to pay as a cash consideration to all shareholders per Austrian Airlines share and redeem the shares at an amount in accordance with the Austrian legislation on the subject.

(116) […] By not submitting an unconditional offer as required, Lufthansa has not complied with the conditions imposed at the start of the process, and acceptance of this offer by ÖIAG should be interpreted as evidence that the process was flawed.

(117) […]

(118) In relation to the conditions imposed in the privatisation mandate, Air France/KLM states, with regard to the ‘Austrian core shareholder’ condition, that, although similar structures had been required in the past, the regulatory landscape has changed since then. Air France/KLM points out that the Council entrusted the Commission with a mandate to negotiate with all third countries to bring all bilateral air agreements signed with these countries into line with Community law. While Air France/KLM recognises that the particular case of Austrian Airlines deserves to be examined more closely, it encouraged the Commission to deal with this issue flexibly, as some of these negotiations with third countries were ongoing.

(119) Nor is Air France/KLM convinced by the argument that the Austrian State acted as a market economy investor. It argues that by accepting a sales price resulting from a flawed process, it has failed to sell its stake in Austrian Airlines under the best possible conditions.

(120) Air France/KLM explains that, after learning of the Austrian Government’s decision to grant financial assistance amounting to EUR 500 million, it informed ÖIAG that […].

(121) Air France/KLM questions whether the Commission should also examine whether Austrian Airlines is not already part of the Lufthansa Group, notwithstanding the conditions attached to the acquisition.

(122) In relation to the restructuring plan, Air France/KLM calls into question whether this financial aid should be described as restructuring aid at all. Air France/KLM does not doubt the financial difficulties encountered by Austrian Airlines but insists that the measures are too weak to restructure the company. The measures proposed by Lufthansa are measures of the type undertaken in the context of an acquisition, and have been artificially relabelled as a ‘restructuring plan’. These measures do not amount to a plan ([…]) and, in any case, do not justify the granting of State aid. Furthermore, there is no evidence that Lufthansa would not be able to implement the same restructuring measures with its own resources.

(123) Air France/KLM wishes to emphasise that, in the current economic climate, the whole aviation sector is facing tremendous pressure, and the Commission must therefore assess the compatibility of the aid proposed by Austria particularly carefully in order to ensure that this aid does not distort competition.

4.5. NIKI

(124) NIKI began its observations of 31 March 2009 by stating its opinion that ÖIAG did not act as a market economy investor when it accepted a negative price for its shareholding in Austrian Airlines. Furthermore, it argues that the sale price does not reflect the market price of Austrian Airlines. It is of the opinion that the sale was linked to conditions, such as, for example, negative purchase price and codetermination by the seller in the acquired undertaking, which would, in any event, have been unacceptable to a market economy investor.

(125) In relation to the negative sales price, NIKI argues that Lufthansa has actually paid a positive price of EUR 366 269 and a warrant worth EUR 162 million to ÖIAG and that the subsidy of EUR 500 million amounts to a condition set by Lufthansa and not a negative sales price.

(126) NIKI is of the opinion that, if a negative price were paid for ÖIAG’s shareholding (41,56 %), such a price would give a total equity value (100 %) of EUR 1,2 billion. However, it is impossible to see how such a negative sales price could be derived from Austrian Airlines’ financial reports. NIKI also explains that the share price of the free float noted on the stock exchange reflects a positive company value (a lowest share price of EUR 2,22 in July 2008 and a 6-month average price of EUR 4,49).

(127) As regards the alternative scenarios, NIKI is critical of ÖIAG’s claim that it is acting as if it were the sole shareholder of Austrian Airlines. NIKI explains that structured liquidation would be possible only with a 75 % majority. However, ÖIAG holds only 41,56 % of Austrian Airlines. NIKI also argues that Austrian Airlines would continue to operate even if it were insolvent. It considers that social plans are voluntary payments which have to be discussed with employees’ representatives. NIKI estimates that, in the event of liquidation, the social plan would cost EUR 5 million. It also states that, in relation to the estimated social cost, Austria is confusing its role as a shareholder with its role as the State.

(128) NIKI also fails to see how the insolvency of Austrian Airlines could have an effect on the share prices and ratings of Telekom Austria AG, OMV AG, and Österreichische Post AG. It is of the opinion that the public does not see these undertakings as a group. These undertakings operate in different sectors, so the insolvency of Austrian Airlines could not have a negative influence on them.

(129) NIKI raises the issue of whether a solution similar to that chosen for Alitalia, resulting in the privatisation of a smaller, healthier Austrian Airlines, would not result in a positive outcome for ÖIAG and have a better effect on competition.

(130) In relation to the privatisation, NIKI is of the opinion that the conditions relating to establishing a committee to protect Austria’s interests and maintaining an Austrian core shareholder structure and Lufthansa’s condition of receiving a capital increase of EUR 500 million for Austrian Airlines all had a negative impact on the price. It is of the opinion that the State should not intervene in the management of an undertaking.

(131) NIKI argues that the selective advantage granted to Austrian Airlines and Lufthansa will distort competition and trade between Member States. It considers that Lufthansa is not a beneficiary eligible for State aid, because it has enough own resources. Furthermore, it is of the opinion that the restructuring plan does not comply with the requirements of the 2004 Guidelines. It also criticises the fact that there are no compensatory measures to offset the distortive effect of the aid on the common market. It considers the reduction in long-haul connections not to be sufficient compensation.

(132) In addition, NIKI is not convinced that Austrian Airlines has not received State aid in the past (in the last 10 years) or that the ‘one time, last time’ principle will be respected. It provides a list of measures which, in its opinion, may involve State aid: (a) exclusive and free grant of air traffic rights, (b) slot coordination of all slots in Austria is done by a company partially owned by Austrian Airlines, (c) lower rent for premises at Vienna Airport, (d) risks associated with the sale of real estate assumed by the public authorities, (e) toleration of Austrian Airlines’ tax vehicles in Guernsey, Channel Islands, (f) capital increase of EUR 146 million by the public shareholder in December 2006 and (g) rescue aid of EUR 200 million.

(133) Furthermore, it explains that Austrian Airlines has introduced short-time work and that the difference between the normal working hours and the reduced working hours will be paid by the State. It is also critical of the fact that, under Austrian labour law, Austrian Airlines will not be able to make staff that have accepted such reduced working hours redundant.

4.6. Air Berlin

(134) Air Berlin’s comments of 8 April 2009 were fully in line with those of NIKI.

4.7. Robin Hood Aviation

(135) In its comments of 8 April 2009, Robin Hood Aviation expresses the opinion that the negative price constitutes State aid and that this State aid will have a negative impact on competition. Furthermore, it will strengthen the dominant position of Austrian Airlines and Lufthansa in the common market, which is why such State aid should be declared incompatible with the common market. Robin Hood Aviation claims that, contrary to the restructuring plan submitted by the Austrian authorities, Austrian Airlines is currently increasing its capacity. In 2009, Austrian Airlines took over additional routes from Lufthansa, such as Graz-Stuttgart, which is also operated by Robin Hood Aviation. According to Robin Hood Aviation, Austrian Airlines offers very low and competitive prices on its routes which are possible only with the envisaged State aid.

4.8. WKO — Die Luftfahrt

(136) In its comments of 8 April 2009, WKO — Die Luftfahrt stressed Austrian Airlines’ importance for Austria’s economic standing and its contribution to safeguarding some 18 000 jobs at Vienna International Airport. It emphasises how important a functioning network is for tourism and the domestic economy.

4.9. Wien — konkret

(137) In its observations of 21 March 2009, Wien — konkret Medien GmbH (hereinafter Wien — konkret) claims to have submitted a binding bid of EUR 10 for Austrian Airlines on 11 November 2008 and states that this is higher than Lufthansa’s bid. On 30 January 2009, this bid was increased to EUR 11. Wien — konkret did not participate in the tendering procedure.

(138) Wien — konkret is also of the opinion that ÖIAG did not act as a prudent private investor. It claims that what it sees as the three alternative scenarios for ÖIAG — (a) to sell the shares on the stock exchange at a share price of EUR 3,90, leading to a revenue of EUR 142 million, (b) Wien — konkret’s bid of EUR 10 and (c) insolvency, costing EUR 0 — would be less costly. It also claims that the conditions in the privatisation mandate (Austrian core shareholder structure) have not been complied with, as Lufthansa is a German company.

(139) Wien — konkret maintains that the negative price will have a negative impact on competition and that it will enable Austrian Airlines to offer very competitive prices on the market. Furthermore, it emphasises that Austrian Airlines has not taken any restructuring measures, such as capacity reduction, staff cuts or reducing personnel costs. It is also of the opinion that granting State aid to the aviation sector has a negative impact on the environment (e.g. CO2 emissions, noise).

4.10. Observations received from private individuals

(140) The comments submitted by 32 private individuals, dated between 11 February 2009 and 10 April 2009, were largely in line with those of Wien — konkret.

5. COMMENTS FROM AUSTRIA ON THIRD-PARTY COMMENTS

(141) The Austrian authorities began their observations by stating that the privatisation process had been open, transparent and unconditional. Although the length of the process was short as a result of the limited validity of the privatisation mandate, it was not unusually short compared with similar processes.

(142) The Austrian authorities stated that there had been no unequal treatment of the bidders participating in the process. The process conditions were the same for all participants. In their opinion, the reason why only one binding offer was submitted had more to do with the dramatic deterioration of the economic situation in the European aviation sector during the privatisation process, the fact that Air France/KLM and British Airways were involved in other transactions and, for bidders other than Lufthansa, the high cost of switching to another alliance.

5.1. The appropriateness of the process

(143) The Austrian authorities find it surprising that Air France/KLM did not know that it was permissible to submit an offer with a negative purchase price. Under the process conditions, submission of an offer with a negative purchase price was possible at all times. If Air France/KLM was truly unsure whether it was permissible to submit an offer with a negative purchase price, it had many opportunities to clarify this issue, either through the investment banks or by submitting a direct inquiry to ÖIAG. However, this did not happen.

(144) The Austrian authorities confirm that Air France/KLM had the opportunity to submit an offer with a negative purchase price, as did the two other bidders remaining in the second round of the privatisation process.

(145) The Austrian authorities go on to say that, shortly after the expiry of the deadline for submission of offers, ÖIAG […].

(146) […]

(147) […]

(148) The Austrian authorities dispute Air France/KLM’s statement that ÖIAG should first have provided Austrian Airlines with a EUR 500 million grant and only then been allowed to privatise the company. Furthermore, a grant provided before privatisation would also have had to be examined under State aid law.

5.2. Negative Purchase Price

(149) The Austrian authorities dispute the argument put forward in NIKI’s submission to the effect that the price was not a negative purchase price but a condition. When evaluating a share purchase, bidders base their decision on the sum of all payments necessary for the purchase. Lufthansa did not make its decision dependent on a non-monetary condition but simply offered a negative purchase price.

5.3. Negative Market Value

(150) In relation to the allegation made in NIKI’s complaint that there was a positive (economic) equity value, referring to the accounting equity value shown in Austrian Airlines’ consolidated balance sheet as at 31 December 2008, the Austrian authorities consider this to be irrelevant, as the figures established on the basis of the International Financial Reporting Standards and their explanatory guidelines are being compared with the company’s market value as a ‘going concern’.

(151) The Austrian authorities refer to a calculation performed by NIKI, showing that, after receiving the EUR 500 million grant, Austrian Airlines could operate for […] years without implementing any restructuring measures, in spite of an annual negative cash flow of EUR […], and point out that this is inconsistent with the economic reality, as Austrian Airlines must at all times be able to satisfy all payment obligations due. NIKI’s allegation that the value of Austrian Airlines is not negative is therefore incorrect.

5.4. Alternative scenarios

(152) NIKI argued that Austrian Airlines would continue to operate even if it were insolvent. The Austrian authorities dispute this, arguing that it is precluded by law. Under Section 109 in conjunction with Section 106 of the Austrian Aviation Act, an air carrier’s operating licence must be revoked in the event of insolvency. The continued operation of an airline by an assets administrator would be inconceivable without an operating licence.

(153) NIKI also claimed that the value of Austrian Airlines’ assets is sufficient to cover its liabilities in the event of liquidation, which means that ÖIAG would not incur any liquidation costs. The Austrian authorities state that this allegation is based on the assumption that the value of Austrian Airlines’ assets exceeds the value of its liabilities by EUR […]. This assumption clearly relates to the equity value shown in the consolidated balance sheet as at 31 December 2008. However, the Austrian authorities are of the opinion that this value cannot be used to draw conclusions about the liquidation costs.

(154) NIKI also argued that, as a ‘minority shareholder’, ÖIAG would not bear the costs of liquidation or insolvency alone. According to the Austrian authorities, this is incorrect. ÖIAG is Austrian Airlines’ controlling and largest shareholder, and it alone is affected by the economic risks to its other investments, which would be associated with a winding-up without social plans. Small shareholders and institutional investors that are not ‘visible’ to the outside world are not exposed to risks of this nature. ÖIAG would therefore have to bear the costs of the social plans alone.

5.5. The restructuring plan

(155) The Austrian authorities dispute the assertions made by NIKI and Air France/KLM that Lufthansa might be a beneficiary of the capital injection of EUR 500 million. They state that this is inconsistent with the facts of the case. The Austrian authorities argue that the view that Lufthansa will profit from the capital increase of its future subsidiary after the transaction has been completed, and so become a beneficiary of the (putative) restructuring aid itself, is untenable. In the opinion of the Austrian authorities, Air France/KLM’s interpretation in this regard is therefore incorrect.

(156) The Austrian authorities dispute the allegation made by certain third parties that the restructuring does not provide for any structural measures and therefore shifts structural adjustments to competitors. Adjustments in the form of capacity reductions to take into account the foreseeable trend in demand are the core of the restructuring plan. In the summer of 2008, Austrian Airlines already reduced its fleet from 105 aircraft to 98 and reduced its long-haul capacity by […]. There is no basis for supposing that Austrian Airlines was pursuing an expansionary strategy on short- and medium-haul routes.

(157) The Austrian authorities also dispute NIKI’s assertion that Austrian Airlines has already received State aid in a variety of ways in the past. The alleged aid is not the subject of the investigation as stated in the Commission’s decision to initiate proceedings. Statements referring to this are therefore inadmissible and irrelevant. In any event, the Austrian authorities decisively reject in this respect the allegation that Austrian Airlines has already received State aid in the past. The measures referred to do not satisfy the definition of aid within the meaning of Article 87(1) of the EC Treaty. Some of these measures were taken before Austria’s accession to the EEA and the EU. Others are not State measures, as, for example, the majority of Vienna Airport is privately owned.

(158) In relation to the capital increase undertaken in 2006, the Austrian authorities point out that private investors subscribed on the same terms as ÖIAG. The capital increase was oversubscribed, and the placement to private investors could have been even larger. In order to avoid diluting ÖIAG’s shareholding, its share of the capital increase was exactly equal to its shareholding in Austrian Airlines. This does not constitute aid. As regards the statement that Austrian Airlines has introduced short-time work and that the difference between the normal working hours and the reduced working hours is paid by the State, this is a generally applicable measure. Equally, any protection afforded under Austrian labour law to staff working reduced hours would be generally applicable.

(159) The Austrian authorities disagree with NIKI’s allegations that granting air traffic rights to Austrian Airlines amounts to State aid. Traffic rights result initially from bilateral air service agreements. Contracting States grant airlines the right to use corresponding traffic rights under bilateral air service agreements. This does not therefore involve any costs to the contracting State. In addition, there is no market for the use of traffic rights. Traffic rights may not be sold or auctioned.

5.6. Replies to other matters raised in the third-party observations

(160) The fact that Austrian Airlines holds an interest in SCA Schedule Coordination Austria GmbH (hereinafter SCA GmbH) was also raised in third-party observations as being problematic. The Austrian authorities state that SCA GmbH is Vienna airport’s schedules facilitator or airport coordinator within the meaning of Regulation (EC) No 793/2004 of the European Parliament and of the Council of 21 April 2004 amending Council Regulation (EEC) No 95/93 on common rules for the allocation of slots at Community airports (29). The activities of SCA GmbH are determined by Regulation (EC) No 793/2004 to such an extent that a single shareholder can exercise no influence whatsoever over slot allocation.

(161) Robin Hood Aviation alleged that the rescue aid was used to finance displacement competition on the Graz-Stuttgart route. The Austrian authorities dispute this.

(162) The Austrian authorities also dispute Ryanair’s assertion that Austrian Airlines would, in future, offer flights below cost in competition with low-cost airlines, arguing that these allegations are unsubstantiated. Moreover, the Austrian authorities are of the opinion that these concerns would essentially be examined by the Commission in merger control proceedings.

(163) By letter of 22 May 2009, the Austrian authorities sent the Commission additional information on a number of points.

(164) In relation to the fact that ÖIAG is considered to be the controlling shareholder of Austrian Airlines, the Austrian authorities point out that ÖIAG holds 41,56 % of the shares in Austrian Airlines directly and has formed a syndicate with other institutional shareholders which holds a further 7,05 % of the shares. The syndicate agreement entails aligned voting in Austrian Airlines’ shareholder meetings. A further 3,45 % of the shares in Austrian Airlines (which do not bear voting rights) are held by Austrian Airlines, while the remaining 47,94 % are held by floating shareholders.

(165) ÖIAG and the syndicate members together hold 48,61 % of the shares in Austrian Airlines and have 50,34 % of the voting rights, since the shares held by Austrian Airlines do not bear voting rights.

(166) The authorities also clarified that floating shareholders are not bound to participate in a sale at a negative purchase price, as Austrian insolvency law does not require shareholders to contribute to the costs of insolvency. Their loss is limited to the loss of their capital contributions or the price at which they purchased the shares. The floating shareholders would therefore not have to bear any costs in the event of the insolvency or liquidation of Austrian Airlines, and would not be bound to take the alternative scenarios into consideration.

(167) Furthermore, floating shareholders do not have to accept a negative purchase price. On the contrary, in transactions involving a change of control of the company, the Austrian Takeover Act stipulates that the takeover price must equal the six-month volume-weighted average stock price, which need bear no relationship to the economic value of their stake. The stock price may be driven — as in the case of Austrian Airlines — by market expectations of a takeover and rarely reflects the fundamental value of the company.

(168) Similarly, the floating shareholders do not have to share in liquidation and insolvency costs and do not have to contribute to a negative purchase price. This ‘free-rider phenomenon’ is the result of the protection afforded to floating shareholders under Austrian corporate and insolvency law and within the legal framework for takeovers under European law.

(169) The Austrian authorities state that the payment of a negative purchase price to ÖIAG is a direct consequence of the negative equity value of Austrian Airlines and, in particular, of the legal requirement for the bidder to buy out the floating shareholders at a price that does not reflect the economic value of the airline in order to obtain 100 % ownership.

(170) In the opinion of the Austrian authorities, ÖIAG acted as a rational private market economy investor by assuming the entire negative purchase price associated with 100 % of Austrian Airlines’ negative equity value and the legally required positive offer price to the floating shareholders in order to fully privatise Austrian Airlines.

(171) The Austrian authorities also state that the floating shareholders did not receive State aid in the course of the privatisation process, as, firstly, the takeover bid does not involve public funds but is paid by the successful bidder, namely Lufthansa, and secondly, the price to be paid to the floating shareholders is not set by the State but determined on the basis of the compulsory rules for calculating a takeover price where a change of control is involved, as laid down in the Austrian Takeover Act.

(172) The Austrian authorities clarified that Austrian law does not require shareholders to assume social costs in the event of insolvency. They pointed out that the Austrian Insolvency Remuneration Fund established pursuant to the Insolvency Remuneration Guarantee Act covers the following costs: — severance payments required by law up to an amount of EUR 6 030 per month, — salary up to an amount of EUR 8 040 per month, — pension claims, limited to 24 monthly payments, calculated from the vesting amount (Unverfallbarkeitsbetrag) and capped at EUR 6 000 per month, — annual leave payments, and — termination payments.

(173) The fund does not cover severance payments or monthly salaries exceeding those thresholds. Furthermore, claims arising from collective bargaining agreements or social plans are not covered by the fund.

(174) […] In this regard, they provided a further estimate of the social costs by Ernst & Young, dated 12 March 2009. This new estimate shows the social costs for (1) the Austrian Airlines Group and (2) Austrian Airlines AG and Tyrolean Airways. […].

(175) The Austrian authorities also provided further information on whether a holding company in a similar situation to ÖIAG would take account of share price losses triggered by rating downgrades and comparable losses.

6. PRESENCE OF AID

6.1. Legal basis for appraisal of aid

(176) Under Article 87(1) of the EC Treaty, ‘any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market’.

(177) The concept of State aid applies to any advantage granted directly or indirectly, financed from State resources or granted by the State itself or by an intermediary body acting by virtue of powers conferred on it by the State.

(178) The criteria laid down in Article 87(1) of the EC Treaty are cumulative. Therefore, in order to determine whether the notified measures constitute State aid within the meaning of Article 87(1) of the EC Treaty, it is necessary to verify whether all of the following criteria have been met. The financial support: — is granted by the State or through State resources, — favours certain undertakings or the production of certain goods, — distorts or threatens to distort competition, and — affects trade between Member States.

(179) The Commission has carried out a close and in-depth analysis of the comments received in the course of the opening of the proceedings and the observations made by Austria. The Commission has also engaged an expert (Moore Stephens) to carry out a study of the financial data and assumptions underpinning the sales transaction.

(180) Moore Stephens carried out its study in Vienna between 23 March 2009 and 16 April 2009. In carrying out this study, it had the support of the Austrian authorities and had access to all necessary documents, including access to the data room.

(181) In the present case, the Austrian authorities have argued that the notified measure does not constitute State aid because the price, which was the result of an open, transparent and non-discriminatory sales process, is the market price. In the alternative, they have argued that the notified measure does not constitute State aid because ÖIAG acted as a market economy investor would have done in a similar situation, in so far as the alternative scenarios facing ÖIAG were all more expensive and ÖIAG chose the least expensive option.

(182) In order to make sure that the sale did not involve State aid, the Commission must assess whether Austrian Airlines was sold at the market price. In this regard, the Commission has developed certain principles in relation to the privatisation of State-owned companies, which have been built up over the years from past decisions made on the basis of the examination of individual cases (30). Depending on the circumstances, State aid could be granted either to the buyer or to the entity being privatised.

6.1.1. Evaluation of the sales price of Austrian Airlines

(183) In the present case, the Commission notes that Austria gave ÖIAG a privatisation mandate which, while requiring ÖIAG to conduct a transparent and non-discriminatory sales process, also imposed a number of conditions. Therefore, prima facie, the presumption that the transaction involves State aid cannot be ruled out.

(184) In this regard, the Commission notes that, by imposing certain conditions on the buyer, the State, as vendor, would potentially lower the sales price and thus forego additional revenue. Furthermore, conditions can deter potentially interested investors from submitting a bid in the first place, so that the competitive environment of the sales process is disturbed, and even the highest of the offers eventually submitted does not necessarily represent the actual market value.

(185) By imposing such conditions and thus accepting that it will not receive the best price for its shares or assets, the State is not acting as a market economy operator, who would try to obtain the highest possible price. Instead, the State is choosing to sell the undertaking at a price below the market value. The Commission is of the opinion that a market economy operator would not have an economic interest in attaching comparable conditions but would sell the company to the highest bidder, who would then be free to determine the future of the acquired company or assets.

(186) In such circumstances, it should be determined whether an undertaking has obtained an economic advantage from the transaction, for which purpose the third subparagraph of point 43 of the 1994 Aviation Guidelines stipulates that the company ‘must be valued by an independent expert who must indicate, under normal circumstances, a going-concern value for the company […]’.

(187) In its ‘Stardust Marine’ judgment, the Court declared that ‘in order to examine whether or not the State has adopted the conduct of a prudent investor operating in a market economy, it is necessary to place oneself in the context of the period during which the financial support measures were taken in order to assess the economic rationality of the State’s conduct, and thus to refrain from any assessment based on a later situation’ (31). In the present case, the decisive point in time is the day (5 December 2008) on which the sale to Lufthansa of ÖIAG’s 41,56 % shareholding in Austrian Airlines was contractually agreed.

(188) As previously mentioned, Austria submitted an evaluation of Austrian Airlines’ equity value on a stand-alone basis as at 5 December 2008, which was prepared by Deloitte based on a going-concern assumption and using the discounted cash flow method (hereinafter DCF). On the basis of this evaluation, including the business plan data, the Commission, assisted by its independent expert, was able to review whether the price paid by Lufthansa corresponds to the market price.

(189) Deloitte produced its DCF valuation in accordance with Austrian professional valuation standards, using the business plan drawn up by the management of Austrian Airlines, adjusted to reflect the change in economic climate and the cost savings the management had agreed to. The business plan available on 5 December 2008 had been drawn up on a stand-alone basis and does not take account of any potential synergies which might be achieved with a strategic partner. The business plan includes optimisation measures (such as […]) totalling EUR […]. Furthermore, it is assumed that […].

(190) In order to determine the impact of these measures on the cash flow of Austrian Airlines, Deloitte used the following three net present value (hereinafter NPV) phases in its evaluation: — Phase I (12/2008-12/2012), based on the management business plan as adjusted by Deloitte, — Phase II (2013 to 2021), which incorporated the […] to reflect this and assumes a growth rate of […] % per year, and — Phase III (2022 onwards), which is the terminal value and is based on the assumption that the business has reached its steady long-term growth rate of […] % per year.

(191) The Commission notes that, in this specific case, the assumptions underpinning the baseline scenario are justified, particularly with regard to the […]. Furthermore, the average age of Austrian Airlines’ fleet is approximately […] years, which is […] compared with that of its competitors. The mix of aircraft types and ages in Austrian Airlines’ fleet is partly the result of its acquisition of two competitors (Lauda and Tyrolean). Furthermore, the fleet is very diverse in comparison with competitors of a similar size. The Commission notes that, on the basis of these two factors, […] should be taken into account in the baseline scenario, even if the company is in financial difficulties and given the importance of savings in restoring profitability in the industry.

(192) The following table summarises the results of the equity value calculation. This calculation is based on the business scenario submitted by Austria, which assumes, among other things, that the weighted average cost of capital (hereinafter WACC) is […] % in phases I and II and […] % (32) in phase III. Table 7 Calculation of the value of Austrian Airlines — baseline scenario (in EUR million) Phase I Phase II Phase III Dec 2008 Ist 2009 Budget 2010 Budget 2011 Budget 2012 Budget 2013-21 Budget (35) 2022 onwards Terminal value Revenue […] […] […] […] […] […] […] EBITDA […] […] […] […] […] […] […] Depreciation […] […] […] […] […] […] […] EBIT […] […] […] […] […] […] […] Adjusted tax […] […] […] […] […] […] […] Net Operating Profit Less Adjusted Tax […] […] […] […] […] […] […] + Depreciation […] […] […] […] […] […] […] +/– Change in capital expenses […] […] […] […] […] […] […] +/– Change in working capital […] […] […] […] […] […] […] Free Cash Flow (FCF) […] […] […] […] […] […] […] WACC […] […] […] […] […] […] […] (34) NPV Phase I + II + III […] […] […] […] […] […] […] Total NPV […] NPV loss carried forward […] Non-operating assets […] Entity value […] Net debt […] Equity value […] Source: Deloitte valuation report dated 19 March 2009

(193) The accumulated NPV of the free cash flows for phases I, II (36) and III, the value of the loss carried forward and the market value of non-operating assets result in an entity value for Austrian Airlines amounting to EUR […]. The market value of liabilities as at 5 December 2008, which amounts to EUR […], must be deducted from the entity value in order to arrive at the negative equity value of EUR […].

(194) The Commission notes that the WACC used as a discount rate for calculating the NPV of the free cash flows assumed a debt risk premium of […] basis points for Austrian Airlines’ debts. This resulted from the risk premium applied by the banks for the rescue loan granted at the beginning of 2009. The Commission notes that, in December 2009, a credit default swap (37) by Lufthansa required a risk premium of […] basis points. Therefore, a risk premium of […] basis points appears to be rather low and does not fully reflect the risk situation of Austrian Airlines.

(195) The Commission’s expert has therefore reviewed Deloitte’s calculation using a WACC of […] % and […] %. The Commission notes that the WACC used — in order to reflect the risk premium which might be required by Austrian Airlines’ shareholders and creditors — significantly increases the negative equity value of Austrian Airlines (see table below). Table 8 Sensitivity analysis of the WACC on the equity value of Austrian Airlines (in EUR million) WACC Equity Value Difference in the equity value […] % in Phase I and II and […] % in Phase III […] […] […] % […] […] […] % […] […]

(196) In addition, the Commission’s expert evaluated a combination of worst- and best-case combinations of events and their impact on the equity value of Austrian Airlines. The expert carried out an evaluation based on Austrian Airlines’ business plan and Deloitte’s evaluation model and has identified best- and worst-case scenarios by applying a debt risk premium he believes the market would apply. The results of these sensitivity analyses are summarised in the table below. Table 9 Sensitivity analysis of the equity value of Austrian Airlines (in EUR million) Entity value (1) Net debt (2) Equity value (1) – (2) Difference in the equity value Difference in the equity value (%) ‘Best-case’ (‘optimistic’) Scenario […] […] […] […] […] Baseline scenario (Deloitte) […] […] […] […] […] ‘Worst-case’ scenario […] […] […] […] […]

(197) In the best-case (most optimistic) scenario, the Commission’s expert assumes that the restructuring plan is more successful than assumed by the management and that the personnel costs can be maintained at a constant level of […] % of revenues for the period from 2009 to 2012. The WACC amounts to […] %. These assumptions lead to an equity value of EUR […] million, which is EUR […] million or […] % more positive than in the baseline scenario calculated by Deloitte.

(198) In the worst-case scenario, the Commission’s expert assumes lower sales growth, which is in line with GDP estimates for Austrian Airlines’ target markets (i.e. a growth rate of […] % instead of […] % in 2011 and […] % instead of […] % in 2012), and assumes that the management will only be able to maintain material and personnel costs at a constant percentage of revenues from 2011 to 2012 rather than introducing cost cutting measures. This leads to an equity value of EUR […] million, which is EUR […] million or […] % more negative than in the baseline scenario.

(199) On this basis, the Commission can conclude that, at the time of the sale, Austrian Airlines’ equity value, calculated on a going-concern assumption (going-concern value), was between EUR […] million and EUR […] million, with a mid-range value of EUR […] million.

(200) The Commission notes that this equity value corresponds to 100 % of the shares in Austrian Airlines. ÖIAG holds only 41,56 % of those shares. However, under Section 22(2) of the Austrian Takeover Act, a direct controlling interest is a direct interest held in a company which gives the holder more than 30 % of the shares with permanent voting rights. Thus, in the present case, ÖIAG can be regarded as the controlling shareholder. There is no other shareholder who could also be considered a controlling shareholder or even a blocking minority shareholder (25 % plus one share).

(201) The Commission notes that a control premium is usually imposed to reflect the increase in value as a result of the benefit of control where the initial indication of value does not reflect this capacity. This is confirmed in the present case by the fact that, by obtaining a controlling interest in Austrian Airlines, Lufthansa assumes full responsibility for restructuring the undertaking, and the benefit of control does not constitute a benefit for the purchaser but rather a burden. The Commission also agrees with the Austrian authorities that a percentage of 58,44 % is a negative control premium which has to be assumed by ÖIAG as the controlling shareholder when selling its shareholding. This explains why Lufthansa will pay a more negative price than 41,56 % of the going-concern price.

(202) In addition, a ‘blockage discount’ must also be assumed for ÖIAG’s shareholding. This discount may be imposed to reflect the negative effect on share price when a large block of shares is offered for sale all at once and the market is flooded with sell orders and demand is insufficient to take up supply. In the present case, ÖIAG’s stake in Austrian Airlines corresponds to 36 626 875 shares out of a total of 88 134 724. It must also be taken into account that only 47,94 % of Austrian Airlines’ share capital is traded on the stock exchange. It is therefore logical that ÖIAG would accept a lower price in order to be able to sell its shares en bloc.

(203) On this basis, the Commission can conclude that the price for ÖIAG’s 41,56 % shareholding corresponds to 100 % of the equity value.

(204) Furthermore, and without prejudice to the arguments set out and the conclusions reached above, the Commission notes that, without taking into account the control premium and blockage discount, the value for 41,56 % would be between EUR […] and EUR […], with a mid-range value of EUR […].

(205) As previously explained, the price paid by Lufthansa is made up of three elements: (a) EUR 366 268,75 (EUR 0,01 per share), (b) a debtor warrant and (c) ÖIAG’s contribution of EUR 500 million.

(206) The Commission’s expert carried out a review of the potential payout under the warrant. He noted that the warrant becomes payable following the signing of Austrian Airlines’ financial statements for the year ending 2011. Under the terms of the warrant, the maximum possible additional consideration cannot exceed the amount per share paid to minority shareholders under the Austrian Takeover Act unless Lufthansa increases its offer to the minority shareholders. Thus the maximum ÖIAG can receive is EUR 164,1 million.

(207) The warrant is made up of two components: […] (38).

(208) […]

(209) The Commission’s expert looked into the report prepared by ÖIAG’s advisors, Merrill Lynch, which analysed the potential payout under the debtor warrant. Moore Stephens concluded that Merrill Lynch’s approach to estimating the payout under the debtor warrant was based on reasonable assumptions and used recognised and established capital market valuation techniques.

(210) Nevertheless, the Commission’s expert carried out a sensitivity analysis in order to determine the payout depending on various […]. The results are summarised in the table below. Table 10 Sensitivity analysis of […] Sensitivity […] Cumulative […] Cumulative adjusted consolidated […] Payout 0,0 % […] […] […] […] % […] […] […] […] % […] […] […] […] % […] […] […]

(211) As regards the […], which is calculated on the basis of […], the Commission notes that, due to the deterioration in the European air passenger and cargo market, there is a risk that the […]

(212) Based on the foregoing, it would appear that the […]. In view of the above, the Commission can conclude that the price paid by Lufthansa is in the range between EUR […] million and EUR […] million, depending on the payout under the debtor warrant (see Table 11 below). Table 11 Summary of the price paid by Lufthansa (in EUR million) Price paid by Lufthansa for ÖIAG’s shareholding Maximum price Minimum price (1) Price for ÖIAG’s shareholding […] […] (2) Debtor warrant ([…]) […] […] (3) ÖIAG grant […] […] Total amount (1) + (2) + (3) […] […]

(213) In relation to the fact that Lufthansa will pay a price for the free-float shares that differs from that paid for ÖIAG’s stake, the Commission notes that public takeovers of companies quoted on the Austrian stock exchange are governed by the Takeover Act, which is implemented by the Takeover Commission. The Takeover Commission ensures that minority shareholders are protected and that the takeover procedure is carried out in the interests of the target company and the securities markets.

(214) The Takeover Act obliges an acquirer of more than 30 % of the target company’s shares to announce a mandatory offer for all of the target company’s equities within 20 days of crossing the threshold (Section 22 of the Takeover Act).

(215) Section 26 of the Takeover Act states that the price of a mandatory or voluntary bid to acquire a controlling interest must not be lower than the highest money consideration paid or agreed by the bidder for these equities over the 12 months preceding the announcement of the bid and that this price must be at least the average stock-market price for the equities concerned, weighted according to the respective trading volumes, over the six months preceding the day on which the bid was announced. Lufthansa, as the acquirer of ÖIAG’s controlling stake, is therefore obliged to make an offer to all shareholders at the weighted average price. The Commission notes that the bidder has no discretion with regard to the level of this price.

(216) In addition, because of the public tendering procedure for ÖIAG’s shares, the transaction attracted media interest, which is why the share price has been influenced by market activity and speculation. The difference in the prices may also be explained by the control discount applicable to minority shareholdings. In contrast to the control premium, the value of minority shareholdings does not reflect the value attached to the controlling interest.

(217) Although the total price paid to ÖIAG is negative and, as explained above, can be derived from a negotiated procedure, the price paid for the free-float shares is set by law, is in fact known to all parties in advance and would amount to approximately EUR 220 million in the present case.

(218) Accordingly, the Commission can conclude that the minority share price is based solely on legal obligations which Lufthansa must meet and that, in the present case, no conclusions regarding the price paid to ÖIAG can therefore be inferred from the price paid to the minority shareholders.

(219) It follows from the above that the price paid by Lufthansa for ÖIAG’s stake is between EUR […] and EUR […]. This must be compared with a going-concern value for Austrian Airlines of between EUR […] and EUR […], with a mid-range value of EUR […]. The price paid is therefore not lower than the going-concern value. The Commission notes that, even though the price paid is only 41,56 % of the value of the company, that price is very close to the range identified by the expert. The Commission therefore concludes that the price paid by Lufthansa is within the range of market prices for the shareholding in Austrian Airlines being sold by ÖIAG. Hence, the conditions did not have an impact on the sales price.

(220) This conclusion is confirmed by a qualitative assessment of the above-mentioned conditions. As set out above, the Austrian authorities argued that the conditions imposed on ÖIAG by the privatisation mandate were not such as to have a negative impact or indeed any impact on the price that the purchasers were willing to pay.

(221) With regard to the goal of ‘preserving as many secure jobs as possible’, the Commission is of the opinion that this requirement is merely a ‘best efforts’ aim. The Commission notes that this condition was formulated in such a manner that it did not impose any onerous or binding obligations on potential buyers. In view of the above considerations, the Commission concludes that, since this condition did not have an onerous character and this was obvious to all potential buyers from the way in which the tender documents were formulated, it did not lower the purchase price and did not have the potential to deter potential investors from submitting a bid, and therefore did not entail a loss of resources for the State. This conclusion is also supported by the fact that all bids submitted by the bidders were limited and carefully worded, giving bidders the flexibility to ensure that their commercial and profit-motivated ambitions could be achieved (39).

(222) Similarly, with regard to ‘establishing a committee to protect Austria’s interests’, the Commission notes that such a committee is purely advisory and has no decision-ma