UPDATE 1-Finland plans to help Finnair with 400 mln euro loan

(Adds detail, government comment)

Dec 16 (Reuters) - Finland is preparing to support national carrier Finnair with an unsecured hybrid loan of up to 400 million euros ($486 million), the company said on Wednesday.

The Finnish government said the COVID-19 pandemic’s second wave had led to a slower than expected recovery in air traffic, resulting in heavy losses for Finnair as it operates at around 10% of normal capacity.

“The state is committed to acting as a responsible anchor owner for Finnair,” Tytti Tuppurainen, the minister in charge of state ownership policies, said in a statement.

“Finland’s geographic location is challenging and therefore we will not manage without functioning air connections.”

Finland has kept some of Europe’s strictest travel restrictions in place throughout the pandemic.

The hybrid loan will not impose additional costs on the state budget, the government said, adding that 400 million euros is still available from a 700 million euro allocation Finland’s parliament approved in May.

Finnair said the latest financing arrangement is subject to confirmation of the terms and conditions of the loan and final government and European Commission approval.

The Finnish state, which holds a 55.9% stake in the airline, has also supported Finnair by participating in a share issue and by granting a 90% guarantee for its pension loan. ($1 = 0.8224 euros) (Reporting by Anne Kauranen Editing by David Goodman)