Indebted Austrian Airlines (AUA) could become insolvent if a planned takeover by Lufthansa falls through, Austrian state holding company and key AUA shareholder OeIAG said on Thursday.

"We are fighting hard to avoid drifting towards insolvency," OeIAG chief executive Peter Michaelis said. "However, I cannot rule out that possibility."

Michaelis told journalists that a restructuring of AUA or a possible insolvency would be more expensive for Austrian taxpayers than the state aid of EUR500 million (USD$652 million) that is part of the Lufthansa deal.

He was therefore hopeful that the European Commission, which will be notified next week, would approve the state aid and the takeover. "Every private investor would have done the same," Michaelis said. "I hope Brussels will agree."