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Coronavirus: Lufthansa “close” to a bailout by the German state

BERLIN (awp / afp) – Europe’s largest airline, Lufthansa, said on Sunday it was close to “an agreement to be bailed out by the German state after being threatened with default by the impact of the new coronavirus.

“We have intense and constructive discussions with the German government” and “in our view these discussions may be concluded in the near future,” the company management said in a message to the staff, a copy of which AFP has obtained.

“The support from the German state would be an essential step for us to secure our future” and to make the planes take off again, he added, while negotiations seemed to be blocked in recent days.

The negotiations, which have lasted for several weeks, relate to total aid of 10 billion euros, according to the weekly Der Spiegel published this weekend.

They are however complicated by the counterparties requested by the German State. He notably wants to enter 25.1%, a blocking minority, in the capital of the company, and thus have a say, according to the newspaper.

Lufthansa’s management refuses to be influenced by the political powers of the countries in which it operates, namely, in addition to Germany, Austria, Switzerland and Belgium.

It has a lot to do, however, on this point with the Social Democratic Party, a member of the government coalition of Angela Merkel and who holds the Ministry of Finance with Olaf Scholz.

“The state is not the idiot of service which is limited to paying the money and then has no more say,” said one of its officials, Carsten Schneider to the daily Die Welt to be published on Monday .

Threat of receivership

“Those who want state support for their business must also fulfill a number of conditions,” he said, rejecting, for example, the idea that Lufthansa could continue to pay dividends to its shareholders while taking advantage of public support.

In the current standoff, Lufthansa is suddenly shaking up another option to get out of business.

Its management confirmed on Sunday “to examine alternatives going as far as the option of placing themselves under the protection of the bankruptcy law” in Germany.

This so-called “light” receivership procedure would allow the company to shelter from its creditors and suppliers while preparing a restructuring plan. A scenario that scares employees and the government because it could result in clear cuts in the workforce.

The boss of Lufthansa recently estimated to have 10,000 extra workers in light of the current crisis.

Out of approximately 760 aircraft, some 700 are currently grounded. More than 80,000 of its 130,000 workers are partially unemployed and the company recently warned of losing one million euros per hour.

However, management emphasized in its letter that bankruptcy was not the most likely scenario. “We are still convinced, in the light of discussions with Berlin, that we will not have to opt for the alternative options,” he wrote.

In Switzerland, things have already moved forward. The state will guarantee 1.2 billion euros in loans to local subsidiaries of Lufthansa, Swiss and Edelweiss.

In Austria, Austrian Airlines (AUA), another subsidiary of Lufthansa, asked Tuesday for public aid of 767 million euros.

The week which opens promises to be decisive for Lufthansa. The company met on Monday with its supervisory board and then held its general shareholders’ meeting online on Tuesday and hopes to quickly conclude negotiations with the various governments.

ylf / lth

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