Vienna  - Soon-to-be privatized flag carrier Austrian Airlines AG reported Tuesday it lost 16.4 million euros (20.5 million dollars) in the third quarter, down from a profit of
29.2 million euros in the same period last year.

Deutsche Lufthansa AG and Russian domestic carrier S7 have both submitted bids to take over the 42.75-per-cent stake in Austrian Airlines which is currently held by the government.

Operating income showed a deficit of 9.4 million euros between July and September, due to high fuel costs, lower earnings on long- distance routes and price pressure from budget carriers, the report said.

Numbers were still in the black in the third quarter of 2007, when earnings before interest and taxes (EBIT) amounted to 42.7 million euros.

Fuel expenses rose by 58.7 per cent in the third quarter, compared with last year.

As income from cargo traffic and aircraft leases picked up, revenue increased by 1.4 per cent to 697.2 million euros.

"As the situation stands at present, we anticipate that the fourth quarter of the 2008 financial year will be characterized by an abrupt slump in demand, negative effects from fuel hedging and the increase in value of the US dollar," the airline's management said.

Sticking to its recently lowered forecast, management said that the airline would make loss of up to 125 million euros this year.

The company plans to cut flights in the winter season, in order implemented a savings package worth 50 million euros.

The government is set to give its state holding OeIAG time until the end of December to privatise Austrian Airlines.

OeIAG CEO Peter Michaelis indicated in an interview with public broadcaster ORF Monday night that that the government would have to take over some of the 900 million euros of the airline's debt for the sale to go through. (dpa)