Lufthansa may seek creditor protection alongside Berlin
rescue talks
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[April 28, 2020] BERLIN
(Reuters) - Lufthansa might seek some form of protection from creditors
while talking to the Berlin government about a 9 billion euro ($9.76
billion) rescue package, a company source said on Tuesday after
government and airline sources said talks on a deal were continuing.
The company source said that the type of creditor protection scheme
under consideration would require the company to be still solvent and
where management could stay on to oversee a restructuring.
Lufthansa declined to comment.
Lufthansa's shares had risen as much as 12.1% earlier on Tuesday, which
traders attributed to prospects of a rescue deal being close. They were
3.3% higher at 1115 GMT.
The shares were also supported by the reported the size of the rescue
package, which met with some earlier expectations, traders said.
Lufthansa and the economy ministry had earlier declined to comment after
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.
A government source said talks would continue but gave no timing.
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.
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 staff demand job guarantees
if tax payer money flows.
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wo Lufthansa airbus A380-800 are parked as air traffic is affected
by the spread of the coronavirus disease (COVID-19), in Frankfurt,
Germany, March 23, 2020. Arne Dedert/Pool via REUTERS/File Photo
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 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.
(Reporting by Michelle Martin, Christian Kraemer, Ilona Wissenbach, Andreas
Rinke, Holger Hansen, Alexander Huebner, writing by Vera Eckert in Frankfurt;
editing by Thomas Seythal/Jason Neely/Jane Merriman/Sabine Wollrab/Arno Schuetze)
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