The German government is engaged in last-minute debates over the details of its bailout of Lufthansa, with Chancellor Angela Merkel seeking a deal that doesn’t involve a direct stake in the national carrier, while her deputy, Finance Minister Olaf Scholz, favors such an investment, according to people familiar with the matter. Under a scenario preferred by the chancellery, as well as the transport ministry and the airline itself, the German government would buy a convertible bond in Lufthansa that could later be exchanged into a direct stake that could be lower than 25%, the people said, declining to be identified because the matter is private. The move would still enable the government to pocket a financial gain and protect the airline from a potential takeover. The Finance and Economy Ministries, on the other hand, have in principle agreed on taking a 25% plus one share stake in the airline at discount price of 2.56 euro per share, the nominal value of Lufthansa’s shares on the balance sheet, other people said. While there is debate inside the government, reaching an accord in principle on the terms of the bailout still seems doable this week, other people said. Details could still change and talks could stretch into next week, said the people.<br/>
star
Bond investors are getting excited again about coronavirus-plagued companies—if the price is right, anyway. United walked away from a $2.25b bond deal arranged by its bankers at JPMorgan Chase & Co. late Friday. The company gave no details in a regulatory filing, saying only that it “had decided not to proceed with” the proposed offering. The problem wasn’t demand, according to people familiar with the situation. Investors ordered more United bonds than were offered. But United didn’t want to commit to other terms investors wanted, including a higher interest rate and more protections for investors in case United defaults, according to these people. When the coronavirus pandemic first brought the global economy and travel to a halt, investors initially avoided debt from companies they thought were going to struggle as Americans traveled and spent less. But after the Federal Reserve’s move to buy corporate debt, the market has reopened even to hard-hit companies. Airlines, in particular, are showing more comfort with their cash positions, even though the industry is burning cash and flights are down as much as 90%. Airplane companies alone sold a combined $32b of debt in late April, including record-setting bond deals from Boeing and Delta have also received billions of dollars in aid from the federal government. By walking away from the table, United is showing it believes it has better options, said Duane Pfennigwerth, an analyst at Evercore ISI.<br/>
The Canadian government is offering more support to Air Canada and WestJet with a new loan program aimed at large companies hit hard by the coronavirus pandemic. Dubbed the Large Employer Emergency Financing Facility (LEEFF), Canada will provide loans starting at C$60m to companies with annual revenues of at least C$300m, according to a Monday statement from PM Justin Trudeau’s office. Air Canada and WestJet could qualify for the new aid funds. Smaller carriers, like Air Transat and Porter Airlines, are assessing whether they qualify, though they also have access to other Canadian government funding sources to help them bridge the crisis. The aid package in Canada is similar to the $25b in loans available to US airlines. Airlines taking assistance would also face similar strings on both sides of the border. These include barring dividend payments and stock buybacks, or using funds for executive pay. The one leg up that Canadian carriers appear to have is an absence of minimum schedule requirements. These rules in the US have forced airlines to fly nearly empty planes, further straining their balance sheets and pumping unneeded carbon into the air.<br/>
Ryanair said Tuesday it has contested state aid provided to Air France and SAS to deal with the plunge in travel due to the coronavirus pandemic before the European Court of Justice. "So far just two decisions have been made by the European Commission and we have formally appealed those decisions and we will go to court," said David O'Brien, the airline's CCO. One of the cases involves Air France, which the French government has decided to help by allowing it to defer certain tax payments. The other SAS, which involves a credit line of $340m that is guaranteed by the governments of Sweden and Denmark. O'Brien said "the guarantee means that in fact SAS will never have to repay that". Concerning Air France, he said the fact that French airlines "don't have to pay French airport taxes but non-French airlines do" was a market distortion. "We will appeal any European Commission state aid decisions that discriminate unlawfully between airlines," said the low-cost airline that operates domestic and international routes in a number of European countries.<br/>
Brussels Airlines announced it would reduce its workforce by a quarter by cutting 1,000 jobs as the coronavirus pandemic continues to ravage the aviation industry. Brussels Airlines, which is Belgium’s biggest carrier, said that the “extremely negative impact of the coronavirus crisis on the company’s financials and ongoing very low demand for air travel” has forced it to make structural changes to reduce costs. The overall size of the company in terms of its workforce will be 25% smaller, the airline said. “This unprecedented crisis has worsened our financial situation obliging us to take substantial and indispensable measures. The restructuring is urgently needed in order to survive the current crisis and to become structurally competitive in the future,” Brussels CEO Dieter Vranckx said. It will also reduce its fleet by 30%, and no longer fly on unprofitable routes. The airline does not expect demand for air travel to return to a “new normal” until 2023. The airline is in talks with the Belgian government for a E290m bailout to weather the crisis, and said it is also seeking financial assistance from its owner Lufthansa.<br/>