Last checked at 
* Could seek protection under insolvency procedure
* Level of state influence a divisive issue
* AUA applies for state aid of 767 mln eur
* Overnight report of a deal was premature
(Adds Austrian Airlines' application for state aid)
BERLIN/VIENNA, 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 the type of creditor protection
under consideration would require the company to be still
solvent, with management staying on to oversee a
restructuring.
Lufthansa, which like many other international carriers was
forced to ground nearly all its flights due to the coronavirus,
declined to comment.
The German flagship carrier's shares had risen as much as
12.1% earlier on Tuesday, which traders attributed to prospects
of a rescue deal being close. They closed 2% higher at 8.09
euros.
The stock was also supported by the reported size of a
rescue package, which met with some expectations, traders
said.
Lufthansa and the economy ministry declined to comment after
news outlet Business Insider cited company sources as saying
Berlin would help in return for a blocking minority and one or
two supervisory board mandates.
The question of state influence in the management of the
company is a tricky one for Germany's coalition government. A
government source said talks would continue but gave no timing.
Germany's conservative government wants 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.
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.
Lufthansa's Austrian unit AUA said late on Tuesday that it
had applied for state aid of 767 million euros, of which a large
part should be repayable loans and the remainder grants. These
grants were still under negotiation, an AUA spokesman said.
The Austrian government has repeatedly said it would require
job guarantees and an assurance that Vienna will remain a
transfer hub in return for financial support.
Lufthansa has issued stark warnings about its solvency amid
a gloomy outlook after the coronavirus crisis grounded almost
all its planes.
CEO Carsten 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 transports only 1% 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,
Alexandra Schwarz-Goerlich, writing by Vera Eckert in Frankfurt
and Kirsti Knolle in Vienna; editing by Thomas Seythal/Jason
Neely/Jane Merriman/Sabine Wollrab/Arno Schuetze/Dan Grebler)
