From wiki:
"Until the end of the 18th century there were only limited attempts in Austria at establishing a navy of its own. The
Habsburgs had employed armed ships sailing the
Danube in the 16th and 17th centuries to fight the
Ottoman Empire, and ships guarding the merchant fleet also operated from the
Austrian Netherlands, but these forces were neither under a common command nor did they serve a common purpose. After the
Seven Years War Austrian vulnerability to privateers in the
Mediterranean Sea led
Count Kaunitz to push for the creation of a small force of
frigates. A specific
Naval Ensign (
Marineflagge) based on the red-white-red colours was introduced only in the reign of
Emperor Joseph II.
This situation changed considerably in 1797 with the
Treaty of Campo Formio between France and Austria. Austria ceded to France the Austrian Netherlands and certain islands in the Mediterranean, including
Corfu and some Venetian islands in the Adriatic.
Venice and its territories were divided between the two states and the Austrian emperor received the city of Venice along with
Istria and
Dalmatia. The Venetian naval forces and facilities were also handed over to Austria and became the basis of the formation of the future Austrian Navy."
http://en.wikipedia.org/wiki/Austrian_Navy#Origins