April 8, 2020 / 4:47 PM / 2 months ago

Lufthansa's Austrian unit negotiates state aid, job cuts

FILE PHOTO: Lufthansa presents its new logo during a press event in a maintenance hangar of the airline at the airport in Frankfurt am Main, Germany February 7, 2018. REUTERS/Ralph Orlowski

VIENNA (Reuters) - Austrian Airlines is in negotiations with the government regarding state aid to save jobs and keep Vienna as a transfer hub for long-haul flights, the carrier said on Wednesday, adding the talks were at an early stage and will probably take weeks.

The Austrian arm of Germany’s Lufthansa (LHAG.DE), which has announced that it would close its Germanwings low-cost carrier and reduce capacity across the group, also signalled job cuts.

How many of its 7,000 employees will lose their jobs will depend on the state aid and how soon the industry will be able to ramp up services, an AUA spokesman said.

He did not comment speculation by several media outlets including public broadcaster ORF about a 500 to 800 million euro aid package.

The finance ministry referred to the Austrian government’s coronavirus aid package of 38 billion euros, when asked about the state aid. It said that AUA could make use of the available instruments.

Both sides had an interest in keeping Vienna as a transfer hub, and therefore it would make sense for the state to provide money in exchange for a location guarantee with a certain amount of jobs, a source close to the talks said.

Lufthansa has idled more than 90% of its fleet since the virus outbreak and has already held talks with the German government on providing liquidity, including through special loans from state development bank KfW.

Reporting by Kirsti Knolle, additional reporting by Francois Murphy; Editing by David Evans

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