(Bloomberg) -- Germany and Deutsche Lufthansa AG are considering cutting back the country’s 9 billion-euro ($10.1 billion) aid package as the airline group closes in on additional commitments from Switzerland, Austria and Belgium, people familiar with the discussion said.
The government is ready to lower the burden for Germany’s taxpayers and is weighing whether to reduce an earmarked 3 billion euros of loans to Lufthansa from the state-run Kreditanstalt fuer Wiederaufbau fund, the people said, asking not to be named discussing a confidential matter.
The German airline, whose empire includes former national carriers in the three other countries, is eager to keep its bailout costs as low as possible, the people said. No decision has been taken as Lufthansa is in ongoing talks to finalize the packages with the three other countries, and discussions with the European Union, shareholders and staff are ongoing, the people said.
Lufthansa declined to comment. A spokeswoman from Germany’s finance ministry also declined to comment.
The contemplated changes highlight the monumental stakes and complex dynamics that have turned the rescue of Europe’s biggest airline into a white-knuckle ride. A pivotal shareholder vote next week on elements of Lufthsansa’s German package is already at risk of failing, and the airline has said that without an injection it may have trouble paying wages in July.
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The airline has an interest in lowering the funds from Germany as the terms of the other agreements are less costly. Discussions about the maximum amount for a reduction are ongoing, the people said.
Its tenuous future hasn’t diminished the urge among government sponsors to duel over how much of a saved, albeit shrunken Lufthansa will be present in each country.
Germany is opposed to Austrian demands that Vienna grow into a bigger hub for Lufthansa, as this would mean added competition for Munich and Frankfurt airports, a person familiar with the discussion said.
Austria has negotiated a 10-year guarantee for Lufthansa’s presence and a commitment that the airline will grow at the same pace in Vienna as at the rival German hubs. This would put pressure on Munich and Frankfurt, after suppliers, authorities and the airport itself all agreed to lower costs to make Vienna more attractive, the people.
Lufthansa and its three units have been working on deals with the respective governments to keep the carrier afloat. In addition to the Germany package including loans and equity, Switzerland is guaranteeing loans of 1.28 billion francs ($1.35 billion), while Austria’s government and the country’s banks will inject 450 million euros. The talks with Belgium are ongoing.
Austria is waiting for the final green light for the German package before it can disburse its funds, a spokesman said.
The German carrier is also facing another hurdle before the funds can be paid out as some investors are threatening to vote against the deal at its June 25 extraordinary shareholder agreement. Lufthansa on Wednesday issued a plea to investors to turn up and vote for the bailout package or risk tipping Europe’s largest airline into insolvency.
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