Austrian Airlines has received a vote of confidence from Lufthansa to help with updating a portion of its fleet, but not without preconditions.

Lufthansa, 100% stakeholder in Austrian, has indicated its willingness to help Austria’s national carrier as it struggles through challenges in it’s business. Austrian has plans to potentially replace a portion of it’s 737 fleet with new Airbus A319’s and A320’s but can not finance the transaction without outside assistance. Austrian has indicated that Lufthansa would be willing to help, so long as it can demonstrate its ability to improve its operating costs structure.

Jaan Albrecht, the new head of the airline since November 1, 2011 (previously the CEO of Star Alliance Services) indicated that Austrian’s objective is to reduce costs by Euro 200 million in 2012. This should translate into profitability for the year. They hope accomplish this by staff cuts and route reductions.

Austrian no doubt faces substantial headwinds in the environment they operate within. With the ETS (Emissions Trading Scheme) adding to pricing pressure on tickets and with continued stress that Europe is under with its economic challenges while at the same time battling increasing fuel prices, this will be no easy task for the Airline.

What IS encouraging here is Lufthansa’s commitment. Recently, Lufthansa had decided to close it’s Italian subsidiary and has reached an agreement to sell it’s British Midland (BMI) unit to IAG, parent company of British Airways and Iberia. By extending this vote of confidence to Austrian, its a clear sign that Lufthansa wants the struggling carrier to succeed and is willing to help, but only if Austrian can demonstrate it has earned the right to have this support.