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German government flies to rescue of Lufthansa

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The German state will take a 20 per cent stake in the national carrier after agreeing a €9bn bailout package

Lufthansa airlines is to receive a €9 billion (£8bn, $9.9bn) rescue package from the German government. This will leave the state in possession of a 20 per cent stake in the national carrier, which it intends to sell by the end of 2023.

The aid, subject to approval by the EU and shareholders, will include €3bn in loans via KfW, the country’s state-owned development bank, and will prevent the airline from paying dividends and constrain executive pay.

As part of the rescue package, the German government will also inject €5.7bn in non-voting capital, a process known as a “silent participation”. Part of these funds can be converted into an additional 5 per cent equity stake, which would enable the government to veto any potential hostile takeover bids.

The bailout deal comes after 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 €100bn to help shore up companies hit by the pandemic.

After grounding 700 of its fleet of approximately 760 aircraft, Lufthansa is planning to ramp up operations in June, offering flights to 130 destinations by the end of the month, subject to travel restrictions in individual countries.

European markets rose on the news, with Lufthansa shares closing 7.5 per cent higher, while Germany’s Dax rose 2 per cent. The Frankfurt-based index closed at its highest level since March 6.

Elsewhere, the French CAC 40 index rose 1.5 per cent, and the pan-European Euro Stoxx 50 climbed 1.1 per cent.

 

For more news go to currency.com

 

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