UPDATE 1-Austria hires Merrill on airline sale-source

LONDON, July 1 (Reuters) - The Austrian government has appointed Merrill Lynch & Co Inc (MER.N: ) to advise it on a possible sale of loss-making Austrian Airlines (AUA) (AUAV.VI: ), a source familiar with the matter said on Tuesday. The appointment marks the government's first concrete move towards selling its 43 percent stake in AUA, or part of it, as rising kerosene costs weigh on the carrier's bottom line. A capital injection by a Saudi investor failed earlier this year. Finance Minister Wilhelm Molterer said last month he was open to all options for AUA, but a strategic partner taking a stake in the national carrier was the most likely scenario. The Social Democrats, who lead the government in coalition with Molterer's conservatives, have in the past opposed a sale but said they were open to a "strategic partnership".... [read full story]