Austria Agrees 450 Million Euro Aid Deal for Lufthansa Arm

Austria has agreed to provide support worth 450 million euros ($508 million) to Deutsche Lufthansa AG’s division in the country, according to people familiar with the matter.

Austrian Airlines will receive 150 million euros in direct aid plus a further 300 million euros in loans underwritten by the government, according to the people, who asked not to be named discussing private negotiations.

Lufthansa will itself provide 150 million euros in cash and has agreed to maintain Vienna as a hub, backed by penalties if it breaks the accord, the people said. Chief Executive Officer Carsten Spohr is planning to come to the Austrian capital Monday or Tuesday to sign the pact, they said.

Spokesmen for Austria’s finance ministry and Austrian Airlines declined to comment.

The Austrian breakthrough comes after Lufthansa won European Union backing for a 9 billion-euro ($10 billion) bailout from Germany as the coronavirus crisis grounds jets and saps cash. Europe’s biggest airline group earlier secured $1.3 billion in credit guarantees for its Swiss arm.

After initially exploring an equity holding in Lufthansa, Austria has settled for guarantees and the right to nominate members to the unit’s supervisory board and ownership trust. Austrian Airlines is regarded as a key plank of the economy, offering vital inter-continental connections.

The carrier will resume some flights to North America and Asia next month after Austria managed to get the Covid-19 pandemic largely under control. Public life has almost returned to normal with borders open to all neighboring states excluding Italy.