S7 Makes Austrian Short List

VIENNA -- Lufthansa, Air France-KLM and S7 were shortlisted for buying a stake in Austrian Airlines, Austrian newspaper Die Presse reported Monday.

British Airways did not make it to the list because the business plan it filed for the loss-making Austrian carrier was incomplete and not convincing, Die Presse reported, citing experts advising on the sale.

The decision was made by Austrian state holding company OeIAG's privatization committee Monday. OeIAG, which is offering its 43 percent stake in the auction, declined to comment.

British Airways shares briefly spiked on the news, trading up as much as 5 percent at 271.5 pence, but they pared gains to trade up 1.8 percent at 262 pence by 3:32 p.m. Austrian Airlines traded up 1.3 percent at 6.29 euros.

Austrian, worth around 532 million euros ($746 million) at Monday's price, is one of several European airlines being sold as rising fuel costs and a declining economy weigh on carriers' earnings.

Lufthansa on Monday signed a deal to buy an initial 45 percent in Brussels Airlines for 65 million euros with an option to buy the rest from 2011. It is also in talks with SAS.

The three shortlisted bidders can now begin to look at Austrian Airlines books in a due diligence process and have to make a binding offer saying what they are ready to pay for the carrier within the next month.

Merrill Lynch is advising OeIAG on the sale.