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
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.
Source: Business Travel News