Saudi Arabian investor Shaikh Mohammed bin Isa Al Jaber has sent a letter to Austrian Airlines saying he wants to pull out of a deal to take a stake in the loss-making airline.

'Austrian Airline confirms the receipt of the letter of withdrawal' from Shaikh Mohammed's lawyers, the carrier said.

According to reports, Shaikh Mohamed, who agreed to acquire a 20 per cent stake in AUA in March, is having second thoughts about the deal after the airline flew back into the red in the first quarter.

The businessman reportedly claims management drew a much more positive picture of the company's finances when negotiating the deal and that meant he was buying his stake at a much higher price of 7.10 euros ($10.9) than AUA's shares are currently worth 3.82 euros.

Meanwhile, the group said it 'categorically rejects the allegations contained in the letter of intentionally misleading' the investor.

And it insisted that the deal, as it was agreed, provided no get-out clause for Shaikh Mohammed.

His letter 'does not have any legal effect, as a withdrawal from the subscription agreement is not possible in that way,' the carrier said.

'Austrian Airlines, OeIAG and representatives of the investor Shaikh Mohammed are currently in talks concerning the preparation of resolutions to be passed in the general assembly regarding the capital increase,' it said.

Shaikh Mohammed agreed with AUA and the carrier's current shareholder, state-owned OeIAG, on the purchase of a 20 per cent stake by way of a capital increase in March. The businessman was to put up 150m euros ($232 million) of the fresh capital.

Shaikh Mohammed, who has Austrian citizenship and owns a range of hotels in Vienna, was to have joined the so-called Austrian syndicate, which includes domestic banks and insurance companies in addition to OeIAG, with a portion of his future shareholding in the airline and thus ensure that a majority stake in AUA remains in Austrian hands.