Late last night German state carrier Lufthansa announced it had taken a €1.2bn loss for the first quarter of 2020, raising the prospect that it could go out of business in weeks unless it receives state aid.
As a result of the coronavirus outbreak, the flier has been forced to ground almost all of its planes due to a near-total collapse in demand.
The airline is in negotiations with the federal government over a potential loan worth up to €10bn in order to see it through the crisis.
Earlier this month chief executive Carsten Spohr said that Lufthansa was seeking state aid in a number of different European countries.
He warned that despite cost-cutting measures the airline was burning through its cash reserves at a rate of €1m per hour, meaning its €4bn in reserves will not be sufficient to keep it afloat through the shutdown.
The loan package will come from numerous sources, including German government’s new equity stabilisation fund, state-guaranteed loans and debt supplied by Switzerland, Belgium and Austria, Lufthansa’s main hubs outside of Germany.
The equity injection is expected to cover €4bn, with an 80 per cent guaranteed loan from German bank KfW of up to €5bn also being touted.
The German government is expected to make its offer to the airline in the coming week.
Any large increase in capital would require the approval of the airline’s shareholders.
CMC Markets head of markets Michael Hewson said that the federal authorities appeared to be stalling their loan decision:
“It’s almost inconceivable that Germany would allow its state carrier to fail, however with options running out that appears to be precisely where we are”.