Austrian Airlines said on Tuesday it had called in its lawyers over a troubled plan for investor Sheikh Mohamed Bin Issa al Jaber to take a 20 per cent stake in the national carrier.

In a deal announced in March, the Saudi-Austrian investor was to take a 20 per cent stake via a capital increase at 7.10 euros for about 150 million euros ($232 million).

The airline wanted the funds to help it expand in the Middle East and elsewhere. In a war of words with the airline and its main shareholder, state holding company OeIAG, Al Jaber confirmed on Tuesday that he had withdrawn from the deal at the end of April.

"We feel that we are caring more about the company AUA, its employees and its shareholders than the people who are managing this company and who are responsible for the tremendous losses," he said in his first comment on the matter.

OeIAG had shown no interest in his investment, had sometimes been irritating and had contradicted his understanding of transparency, al Jaber said.

He said he had withdrawn because he had been deliberately misled about the airline's results and it had urged him to speed up the deal after it announced a return to profit in 2007 on March 12.

But the airline posted a first-quarter loss of earnings before interest and tax (EBIT) of 50.1 million euros in April, much worse than expected, sending the shares sliding.

Chief executive Alfred Oetsch, asked in a radio interview on Tuesday what happens to the contract now, said: "We will hand the subject over to our lawyers. I cannot say now whether we are demanding that the contract be fulfilled, or damages."

The airline on Tuesday extended a deadline that expired on Monday for al Jaber to provide a bank guarantee for the deal. "It was only fair to give him a chance to fulfil the contract," Oetsch said.

The airline and OeIAG said the contract with Al Jaber, who runs a hotel empire and a charitable foundation, was watertight and binding.

OeIAG, in a statement, for the first time gave details of al Jaber's additional demands. It said he wanted further shares for up to 50 million euros at about 4 euros each and greater influence on the management board, the supervisory board and the steering committee.

Al Jaber said the additional terms were worked out in talks last week that involved OeIAG and Austrian Finance Minister Wilhelm Molterer but OeIAG had later rejected them.

OeIAG said: "In order to ensure control of Austrian Airlines by OeIAG and its syndicate partners, and the economic interests of society and the Austrian republic, it was inconceivable to meet the additional demands of Sheikh al Jaber."

The airline denies deliberately misleading al Jaber and says the first quarter is typically the worst of the year for the airline sector.

Shares of Austrian Airlines were down 2.6 percent at 4.07 euros at 1319 GMT, underperforming the main ATX index, which was up 2.3 percent.-Reuters