German government takes 20% stake in carrier as Lufthansa bailout is agreed

©Lufthansa

In return for a €9 billion (US$9.8 billion) bailout package, Germany’s flag-carrying airline Lufthansa will relinquish up to a 20% stake in the carrier to the German government. In addition, Lufthansa will have to relinquish over 24 of its take-off and landing slots at Frankfurt and Munich airports to new competitors. There will be a time limit of eighteen months set on the uptake of these slots and if no new competitor does so, then they will be offered to existing competitors.

The package has been heavily negotiated with EU intervention and specific involvement of the EU Commission. “The scope of the conditions required in the EU Commission’s view has been reduced in comparison with initial indications,” Lufthansa said in a statement. The package is applicable to the whole Lufthansa group of airlines, which includes Austrian Airlines, Swiss International Air Lines and Eurowings, though in early April it had been announced that Lufthansa will be closing down Germanwings, its low-cost subsidiary.

The 20% share in the company means the German government will automatically become the leading shareholder in the company which recently posted a trading loss of €1.2 billion (US$1.31 billion), while it will also have the option to acquire a further 5% stake through the purchase of debt purchases. Lufthansa said: “The Supervisory Board must approve the stabilization package negotiated with the Economic Stabilization Fund (of the Federal Republic of Germany), including the commitments to the EU Commission. Subsequent to the Supervisory Board’s decision, the company intends to convene an Extraordinary General Meeting in the near future to obtain shareholder approval for the WSF stabilization measures.”

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