Lufthansa rescue deal includes government investment

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Lufthansa rescue deal includes government investment

The Lufthansa Group has agreed to a deal with the German government worth 9 billion euros (about $9.9 billion) that will shore up the company’s finances to survive the impact of the coronavirus pandemic.

Following weeks of negotiations with the Economic Stabilisation Fund, the airline group will receive 5.7 billion euros in “silent participation,” or nonvoting capital, from the German government, some of which can be converted into a 5% equity stake -- which would give the government a presence on the group’s board.

Furthermore, Germany is acquiring a 20% stake in the share capital of Lufthansa Group, though it intends to sell this by the end of 2023.

Speaking at a press conference on Monday, Germany finance minister Olaf Scholz said: “When the company is fit again, the state will sell its stake and hopefully … with a small profit that puts us in a position to finance the many, many requirements which we have to meet now, not only at this company.”

The measures are supplemented by a credit facility of 3 billion euros for a term of three years.

According to Lufthansa, conditions of the bailout include the waiver of future dividend payments and restrictions on management remuneration. In addition, the German government will take two seats on Lufthansa’s supervisory board.

The financing package still requires the approval of Lufthansa’s shareholders and the European Union. If approved, the bailout could save up to 10,000 jobs. Lufthansa warned in April that it expected to run out of cash within weeks without government support.

Lufthansa Group’s airlines prepare to reintroduce more flights to their schedules in June. The group has said it does not expect passenger demand to return to pre-coronavirus levels for several years and has permanently decommissioned a number of aircraft to reduce its capacity in Frankfurt and Munich. It has also closed all Germanwings operations and will speed up restructuring programs at Austrian Airlines and Brussels Airlines.
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Source: Business Travel News

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