May 6, 2020 / 9:58 PM / 21 days ago

Lufthansa's Austrian unit considers 15% job cut: report

FILE PHOTO: Austrian Airlines planes are seen parked at Vienna International Airport during the spread of the coronavirus disease (COVID-19) in Schwechat, Austria, April 24, 2020. REUTERS/Lisi Niesner

VIENNA (Reuters) - Lufthansa’s (LHAG.DE) Austrian unit could cut 15% of its 7,000 jobs and reduce salaries by 13% as part of a package designed to convince the Austrian government of its future viability and persuade it to grant the group state aid, newswire APA reported.

Austrian Airlines (AUA) declined to comment on the APA report on Thursday. Its supervisory board met on Wednesday to discuss survival strategies as the coronavirus lockdown measures have brought the airline to a standstill with no income.

The group has applied for 767 million euros ($828 million) in state aid, but the Austrian government has demanded job guarantees and an assurance that the group will keep Vienna as a transfer hub before committing to any financial support.

Parent Lufthansa, which is preparing to restart passenger flights slowly from June, is currently in talks with the German, Austrian, Swiss and Belgian authorities about a roughly 10 billion euro bailout.

Lufthansa Chief Executive Carsten Spohr has said that he expects to clinch a deal with Germany shortly. In Switzerland, parliament has already backed a 1.275 billion franc ($1.3 billion) package in loan guarantees for Lufthansa units Swiss and Edelweiss.

About 1,100 AUA jobs could be cut by 2023, and reduced working hours agreements - currently agreed for nearly all AUA staff until mid-May - could be extended to two to three years, APA reported from an unidentified source.

As an alternative, AUA management has also started preparations for an insolvency plan that would lead to self-administration, APA said.

Such a path could offer AUA a further option to recapitalise so that insolvency proceedings would not lead to a total loss of the company. The Austrian government has considered that option as a possible rescue plan as well.

Reporting by Francois Murphy and Kirsti Knolle; Editing by Sandra Maler and Jan Harvey

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