(Add details, government comment)

December 16 (Reuters) – Finland is preparing to back national airline Finnair with an unsecured hybrid loan of up to 400 million euros ($ 486 million), the company said on Wednesday.

The Finnish government has said that the second wave of the COVID-19 pandemic has caused a slower-than-expected recovery in air traffic, causing heavy losses for Finnair as it is operating at around 10% of its normal capacity.

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

“Finland’s geographic location is difficult and therefore we will not be successful without functioning air links. “

Finland has maintained some of Europe’s toughest travel restrictions throughout the pandemic.

The hybrid loan will not impose additional costs on the state budget, the government said, adding that € 400 million is still available out of an allocation of € 700 million approved by the Finnish parliament in May.

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

The Finnish state, which owns 55.9% of the airline’s capital, also supported Finnair by participating in a capital increase and by providing a 90% guarantee on its retirement loan. ($ 1 = 0.8224 euros) (Report by Anne Kauranen Editing by David Goodman)