Lufthansa rescue package worth €9 billion approved by German government

Daniel Fowler
May 26, 2020

German airline Lufthansa said Monday it has received approval for a 9 billion-euro ($9.8 billion) "stabilization package" from a government support fund to keep the company going through the turbulence from the coronavirus outbreak, but cautions the deal has not been approved by the European Union's executive commission.

And Berlin still has a 15 per cent holding in Commerzbank, which it took on during the global financial crisis.

Germany's Finance Ministry and Economic Affairs Ministry said on Monday that Lufthansa, whose shares closed up 7.5 percent at 8.64 euros ($9.42), had been operationally healthy and profitable with good prospects, but had run into trouble because of the pandemic.

Last week, the airline group announced that it was in the "advanced stage" of talks with German government officials regarding a bailout worth €9 billion ($9.9 billion) that would give the government a 20% stake in the company.

In addition, the government will acquire a 20% stake in Lufthansa for €2.56 per share ($2.79), or about €300 million ($327 million).

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"[The bailout deal] will prevent Lufthansa from being sold out", Economy Minister Peter Altmaier said, adding that it would help save thousands of jobs but did not include any extra environmental conditions on top of planned measures. He said the government wasn't planning to interfere in the business of running the airline and meant to sell the stake eventually.

Under the bailout package, the government will also inject €5.7bn in non-voting capital, known as a silent participation. 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. One of those seats would be on the audit committee.

A further €3 billion will be provided to Deutsche Lufthansa AG in the form of a loan issued by state-owned development bank KFW, as well as private banks.

Mr Altmaier declined to give details about the remaining sticking points in negotiations with the European Commission, but said he was convinced that Brussels would give approval to the bailout.

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