Lufthansa Expects to Reach Deal on German Government Aid Soon

(Bloomberg) -- Deutsche Lufthansa AG's talks with the German government over a multi-billion euro aid package are coming down to how much the state will profit over coming years for rescuing Europe's biggest airline, people familiar with the matter said.

While Lufthansa Chief Executive Officer Carsten Spohr said this weekend that negotiations are moving toward a conclusion, the sides are still haggling over financing terms, according to the people, who asked not to be named discussing private deliberations.

Germany wants to be sure it emerges better than even from a bailout after losing money when rescuing banks following the 2008 financial rout. Lufthansa fears that will make it harder to weather a extended travel slump and compete with airlines that have received more generous terms for state assistance.

Negotiations concern loans, credit guarantees and a state equity injection, split between shares with voting rights and a so-called silent participation limiting the government's day-to-day say. Officials are pushing for a 9% guaranteed dividend for the latter, a figure the airline says is too high, the people said.

An agreement is still expected to be in place in the next few days or early next week, they said. Lufthansa shares traded 2.7% lower as of 12:21 p.m. in Frankfurt Monday, taking the slump this year to 52%.

Like airlines the world over, Lufthansa is fighting for survival as the coronavirus crisis punctures a decades-long aviation boom. It's cutting back the fleet and closing discount arm Germanwings to resize for what it warns could be years of depressed demand.

The four-nation carrier is also continuing negotiations with Austria and Belgium after securing credit guarantees from Switzerland last week.

Austria is considering an equity or silent participation deal, with an agreement likely to follow a German accord, one person said. Chancellor Sebastian Kurz is seeking assurances that Vienna will remain a transfer hub with direct flights to North America and Asia, the person said.

Lufthansa warned last month that it would run low on cash within weeks after grounding almost all its operations. The airline will host its annual meeting online Tuesday, with management planning to update shareholders on the progress of government talks.

Spohr will say Lufthansa's future is at stake, with a bailout vital to avoid insolvency, according to the text of his speech released by the airline.

Germany's coalition government last week agreed to a unified position that will see it take a stake of at least 25% in exchange for voting rights and at least one seat on the supervisory board, people familiar with the matter have said.

Read: Lufthansa Running Out of Bailout Road as Germany Sets Terms