Germany’s struggling carrier Lufthansa agrees to $10 billion state rescue package

Andrew Cummings
May 26, 2020

As part of the largest German corporate rescue since the coronavirus crisis struck, the government will take a 20 percent stake, which could rise to 25 percent plus one share in the event of a takeover attempt, as it seeks to protect thousands of jobs.

The airline has been in talks with Berlin for weeks over aid to help it to cope with what is expected to be a protracted travel slump, but the carrier has been wrangling over how much control to yield in return for support. The airline said, however, that the government agreed not to vote at shareholder meetings unless there was a takeover of the company. Berlin also still has a 15 percent holding in Commerzbank, which it took on during the global financial crisis.

That would leave the government fund with a 20% stake in the company and two seats on the board of directors.


Other airlines including Air France-KLM and USA carriers American, United and Delta airlines have also sought state aid after the coronavirus hit global travel.

Lufthansa (DLAKY) said in a statement Monday that Germany's Federal Economic Stabilization Fund, which is being used to assist companies hit by the coronavirus pandemic, has approved a "stabilization package", which the company's executive board supports. It has agreed to sell its shares in full by the end of 2023, subject to full repayment of its $6.2 billion investment and the share price being above the purchase price.

On Thursday, Lufthansa said the conditions of the bailout were likely to include "the waiver of future dividend payments and restrictions on management remuneration".


Lufthansa will also receive a €3bn, three-year loan from state-backed KfW and private banks.

The company's trading statement said that the deal has not been approved by the European Commission, which could set conditions meant to preserve fair competition.

According to the Handelsblatt business newspaper, Chancellor Angela Merkel said on Monday that the German government would not allow the European Commission to deprive Lufthansa of valuable take-off and landing slots at Frankfurt and Munich airports.


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