Berlin government, Lufthansa pursue rescue deal: Sources

BERLIN: Lufthansa (LHAG.DE) and the Berlin government are pursuing a 9 billion euro ($9.76 billion) rescue package for the airline, company and government sources said on Tuesday, but gave no timing for an agreement after a report overnight said the deal was complete.

Lufthansa declined to comment and a spokeswoman for the economy ministry had no immediate comment. A government source said talks would continue.

Sources close to the talks said there would potentially be a conversation on Tuesday between Chancellor Angela Merkel and Lufthansa Chief Executive Carsten Spohr, but they added this was not with view to concluding a deal.

Lufthansa’s shares were up as much as 12.1%, which traders attributed to prospects of a nearing deal amid time pressure to stem ongoing losses. The shares were also supported by reported the size of the rescue deal, which met with some earlier expectations, they said.

News outlet Business Insider had cited company sources as saying that Berlin would help the airline in return for a blocking minority and one or two supervisory board mandates.

The question of state influence in the management of the company is a tricky one for Germany’s coalition government.

Merkel’s conservatives (CDU/CSU) want to leave Lufthansa’s management relatively free of intervention, while the Social Democrats (SPD) want the state to share ownership in order to influence decision-making to protect employees.

Unions representing pilots, crews and ground level workers demand job guarantees if tax payer money flows.

Spohr was cited in weekly newspaper Die Zeit as saying the company needed to remain in charge of its decision-making.

If Berlin had too much say, then governments of Austria, Switzerland, Belgium and federal German states could want to follow suit. Lufthansa has subsidiaries in Austria, Switzerland and Belgium and its two German hubs Frankfurt and Munich are located in the state of Hesse and Bavaria.

The company has issued stark warnings about its solvency amid a gloomy outlook after the coronavirus crisis has grounded almost all its planes.

Spohr this month cited cash burn at a rate of 1 million euros per hour, meaning the airline’s 4 billion euro cash reserves will be inadequate.

Lufthansa currently only transports one percent of passengers compared with a year ago. Some 100 aircraft of its 760-strong fleet could be idled and 10,000 jobs are in danger, Spohr said last week.

Some rival airlines in Europe and in the United States have secured government help, but others have said they aim to manage without it.

Spohr assured Belgian Prime Minister Sophie Wilmès in a letter seen by a broadcaster he has no plans to sell Belgian unit Brussels Airline.

($1 = 0.9218 euros)

Source: Reuters, Reporting by Michelle Martin, Christian Kraemer, Ilona Wissenbach, Andreas Rinke, writing by Vera Eckert in Frankfurt; editing by Thomas Seythal/ Jason Neely/Jane Merriman



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