Lufthansa completes €9bn rescue deal with German government
Lufthansa has agreed a €9 billion bailout with the German federal government as it sees to avoid financial collapse in the wake of the Covid-19 outbreak.
The airline has been severely affected by a decline in travel during the pandemic.
Under the plans, the Economic Stabilisation Fund (WSF) will take a 20 per cent stake in the airline, which it hopes to sell by 2023.
As part of the package, the German government will also inject €5.7 billion in non-voting capital, known as a “silent participation”.
Part of these funds can be converted into an additional five per cent equity stake.
This would then enable the German government to veto any potential hostile takeover bids.
The bailout deal is the result of weeks of talks between Lufthansa and the German government about financial aid and will help save up to 10,000 jobs.
The German government has set aside a fund of €100 billion to help shore up companies struck down by the pandemic.
The package still requires the final approval of the management board and the supervisory board of Lufthansa.
In additional, the capital measures are subject to the approval of an extraordinary general meeting.
Finally, the stabilisation package is subject to the approval of the European Commission and any competition-related conditions.
Lufthansa chief Carsten Spohr successfully negotiated the deal
Lufthansa has made permanent changes to its structure in the wake of the coronavirus pandemic.
According to an assessment from the German flag-carrier, it will take several months until the global travel restrictions are completely lifted and “years” until the worldwide demand for air travel returns to pre-crisis levels.
As a result, six Airbus A380s and seven A340-600s, as well as five Boeing 747-400s, will be permanently decommissioned.
Germanwings will also be discontinued.
Earlier this month, Air France-KLM secured €7 billion in government support.