Air France-KLM would still be interested in buying Austrian Airlines if the troubled carrier was put up for sale in a fresh auction, Austrian newspaper Kurier reported on Wednesday.

Kurier said the European Commission, which is investigating German airline Lufthansa's plan to buy Austrian Airlines (AUA), has asked Air France whether it would bid again in a new AUA auction and that Air France replied that it would.

Air France declined to comment on the report.

Air France was the runner-up in the tender of the Austrian government's 42-percent stake in AUA last year and later complained at the Commission that the process had favored Lufthansa.

Lufthansa and the Commission are now embroiled in a battle of nerves over the AUA purchase. The Commission fears the merger will hamper competition and raise airfares while Lufthansa is reluctant to give up lucrative routes.

If the Commission does not approve the deal under conditions acceptable to Lufthansa by July 31, the German airline can pull out.

(Reporting by Boris Groendahl and Helen Massy-Beresford; editing by John Stonestreet)