Lufthansa CEO Wolfgang Mayrhuber, Austrian state holding company OeIAG CEO Peter Michaelis and Austrian Airlines (AUA) co-chief executives Peter Malanik and Andreas Bierwirth (left) sign contracts finalizing the takeover of AUA by Lufthansa(REUTERS)

VIENNA (AP) – The takeover of the ailing Austrian Airlines Group by Germany's Deutsche Lufthansa AG was completed Thursday, ending months of negotiations and marking a new start for the Alpine republic's flagship carrier.

Officials formally sealed the deal at Vienna's international airport.

"Today marks the conclusion of the privatization of Austrian Airlines,'' said Peter Michaelis, the head of Austria's privatization agency, at a news conference. "It was unquestionably hard work but we can now say it was worth it - firstly for AUA but ultimately for Austria.''

Last week, the European Commission green-lighted the roughly euro366,000 ($523,000) bid for about 42 percent of the Austrian government's shares in Austrian and also approved a euro500 million ($715 million) government restructuring program, which Lufthansa has said in the past would be necessary to reduce Austrian's debt.

The Cologne-based Lufthansa, which is now Europe's largest airline by sales, had also made a euro166 million ($237 million) offer for the free floating Austrian shares.

In total, Lufthansa said the merger means it will hold more than 90 percent of Austrian shares.

"Including shares that were previously held by (Austria's privatization agency) and shares that have already been submitted within the ongoing extension of the additional acceptance period, Lufthansa will hold more than 90 percent of the shares in Austrian Airlines AG,'' Lufthansa said in a statement.

Wolfgang Mayrhuber, Lufthansa's chief executive, said he looked forward to working together with Austrian Airlines and openly addressed the struggling carrier's financial difficulties that will cost many employees their jobs.

"AUA doesn't have a product problem, it has a cost problem,'' Mayrhuber said.

Hard-hit Austrian announced in July it planned to cut about 1,000 jobs by mid-2010 as part of an effort to boost its competitiveness.

Austrian still may need to eliminate up to 500 of its 7,300 jobs to cut costs, the Austria Press Agency reported late Thursday. It said the airline planned to announce further details in October.

But referring to the takeover as a "long-term investment,'' Mayrhuber also appeared optimistic that Austrian could stop seeing losses as early as next year.

Under the deal, 51-year-old Austrian will keep its name and distinct red and white coloring.