Last checked at 
* Could seek protection under insolvency procedure
* Level of state influence a divisive issue
* Overnight report of a deal was premature
(Recasts with latest comment from company source)
BERLIN, April 28 (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.
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.
($1 = 0.9218 euros)
(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)
