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(Adds details on state aid, background)
By Arno Schuetze, John Miller and Alexandra Schwarz-Goerlich
FRANKFURT/ZURICH/VIENNA, April 29 (Reuters) - Switzerland
and Austria pledged to help Lufthansa with state-backed loans as
the German airline pursues talks with Berlin over a 9 billion
euro ($9.8 billion) rescue package.
The Swiss government said on Wednesday it will ask
parliament for 1.275 billion francs in loan guarantees for
Lufthansa units Swiss and Edelweiss.
Strict travel restrictions to contain the coronavirus
pandemic have brought flights to a near-halt across the world
and there is no end in sight for when they can restart, leaving
many airlines begging governments for rescue packages.
The International Air Transport Association this month
estimated that revenue losses from the coronavirus pandemic have
risen to $314 billion.
Lufthansa's Austrian airline AUA said on Tuesday that it had
applied for 767 million euros in state aid, of which a large
part should be repayable loans and the remainder grants.
An AUA spokesman said these grants were still under
negotiation and both Switzerland and Austria attached conditions
on their participation in the bailout.
"The funds guaranteed by the Swiss government are only to be
used for Swiss infrastructure," the government said, adding that
the loans would be secured by shares in Swiss and Edelweiss.
Dividends or other payments would be forbidden until public
assistance has been repaid, it added.
Ahead of a meeting with Lufthansa boss Carsten
Spohr, Chancellor Sebastian Kurz said that Austria's government
is seeking job guarantees and an assurance that Vienna will
remain a transfer hub in return for financial support.
Economy Minister Peter Altmaier said that in bailouts such
as that of Lufthansa Germany would ensure that companies did not
pay dividends, while also making sure entrepreneurial freedom
was guaranteed and any state involvement limited in time.
A German government source said talks about Lufthansa would
continue, but gave no timing.
The question of state influence is tricky for Germany's
coalition government as the conservatives want to leave
Lufthansa's management relatively free of intervention, while
the Social Democrats want the state to share ownership in order
to influence decision-making and protect employees.
Unions representing pilots, crews and ground staff are
demanding job guarantees if Lufthansa gets German taxpayer
cash.
While the exact split of the rescue deal is unclear, the
combined contribution in loans from all countries participating
could be around 6 billion euros, while the equity component may
be around 3 billion euros, one person close to the matter said.
The equity element is expected to come as a mix of new
shares as well as a non-voting form of capital dubbed "silent
participation", people close to the matter have said.
The pricing of the new shares would likely be similar to
that of a rights issue, meaning that Lufthansa would have to
grant a steep discount on the new shares, two of the people
said. Typically, companies market shares at a discount of around
30% of the theoretical ex rights price in such deals.
The coupon of the silent participation is expected to be
higher than 5%, the sources said. It could even be more than 8%,
one said, adding that interested payments could be deferred.
Lufthansa declined to comment.
The airline's CEO Carsten Spohr this month cited cash burn
at a rate of 1 million euros per hour, meaning its 4 billion
euro cash reserves will be inadequate.
Lufthansa is only carrying 1% of passengers compared with a
year ago, while some 100 aircraft of its 760-strong fleet could
be idled and 10,000 jobs are in danger, Spohr said last week.
While some airlines in Europe and the United States have
secured government help, others such as British Airways parent
IAG have said they aim to manage without it.
(Additional reporting by Christian Krämer, Andreas Rinke and
Ilona Wissenbach; Editing by Alexander Smith)
