© Reuters. FILE PHOTO: A flag of German air carrier Lufthansa flutters in the wind on the day of the airline’s annual general meeting at the airport in Frankfurt, Germany, May 4, 2021. REUTERS/Kai Pfaffenbach/File Photo

BERLIN (Reuters) – Germany is leaning towards participating in a planned 3 billion euro capital increase at Lufthansa to limit a dilution of its 20% stake in the airline and ensure the refinancing measure is successful, Bloomberg reported on Wednesday.

Reuters last month reported that Lufthansa was working with Deutsche Bank (DE:) and Bank of America (NYSE:) on plans for a capital increase in either the summer or autumn.

Participation from the German government could send a positive signal to markets but could also prompt state aid questions from the European Commission, say people in the sector.

The bulk of a government-backed 9 billion euro bailout for the German carrier, hit hard by the coronavirus crisis, consists of a silent participation of 5.5 billion euros which Lufthansa intends to repay in part with proceeds of the capital increase.

Citing unnamed sources familiar with the matter, Bloomberg reported that the government could sell part of its subscription rights and use the proceeds to purchase new shares. Alternatively, it could make use of more of its subscription rights and spend up to 1 billion euros.

Lufthansa and the finance and economy ministries declined to comment.

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