Lufthansa agrees €9bn bailout with German government
Germany has thrown Lufthansa a €9bn (£8bn) lifeline, agreeing a bailout that gives Berlin a veto in the event of a hostile bid for the airline.
The largest German corporate rescue since the coronavirus crisis struck will result in the government taking a 20% stake, which could rise to 25% plus one share in the event of a takeover attempt, as it seeks to protect thousands of jobs.
The Ryanair chief Michael O’Leary, an outspoken critic of the government aid packages being accepted by rival airlines across Europe, said he intended to lodge an appeal against the deal.
“Lufthansa is addicted to state aid,” said O’Leary. “Ryanair will appeal against this latest example of illegal state aid, which will massively distort competition and the level playing field into [the] provision of flights to and from Germany for the next five years.”
Lufthansa had been locked in talks with Berlin for weeks over aid it needs to survive a protracted travel slump, with the airline wrangling over how much control to yield in return for financial support.
The International Air Transport Association (Iata) said on Tuesday the increased debt levels being run up by airlines during the pandemic could lead to more failures.
Iata said global airline debt was due to rise by more than a quarter to $550bn by the end of the year, with governments providing more than $120bn in support for struggling carriers.
Chile’s Latam Airlines Group filed for US bankruptcy protection on Tuesday, becoming the largest airline to date to succumb to the financial pressure wrought by the pandemic.
This month Colombia’s Avianca, Latin America’s second largest airline and Latam’s main rival, filed for bankruptcy in the US.
As well as Lufthansa, airlines including the Franco-Dutch Air France-KLM and the US carriers American Airlines, United Airlines and Delta Air Lines have sought state aid.
Germany’s finance and economy ministries said Lufthansa had been operationally healthy and profitable with good prospects but had run into trouble because of the pandemic.
“The support that we’re preparing here is for a limited period,” the finance minister, Olaf Scholz, said of the deal, under which Germany is buying new shares at the nominal value of €2.56 apiece for a total of about €300m.
Berlin, which has set up a €100bn fund to take stakes in companies struck by the coronavirus crisis, said it planned to sell the Lufthansa stake by the end of 2023.
“When the company is fit again, the state will sell its stake and hopefully … with a small profit that puts us into a position to finance the many, many requirements which we have to meet now, not only at this company,” Scholz added.
Conditions of the deal include the waiver of future dividend payments and limits on management pay, Lufthansa said, adding that the government would fill two seats on its supervisory board, with one becoming a member of the audit committee.
Under the bailout package, the government will also inject €5.7bn in non-voting capital, known as a silent participation.
Part of this could be converted into an additional 5% equity stake, either to protect Lufthansa against a hostile takeover or in case coupon payments of 4% in 2020 and 2021, increasing to 9.5% by 2027, are missed by the airline.
“This bailout deal will prevent Lufthansa from being sold out,” said the economy minister, Peter Altmaier, adding that it would help to save thousands of jobs but did not include any extra environmental conditions on top of planned measures.
Lufthansa will separately receive a €3bn, three-year loan from statebacked KfW bank and private banks.
The state’s WSF rescue fund plans to refrain from exercising voting rights at regular shareholder meetings under the bailout deal, which still requires approval by shareholders as well as the European commission, Lufthansa said.
Altmaier declined to give details about the remaining sticking points in negotiations with the European commission, but he said he was convinced that Brussels would give the green light for the bailout.
“We liaised with Brussels on all big rescue packages with which we avoided millions of unemployed and prevented a lot of companies from bankruptcy. They were all approved at the end … so this gives me hope that we’ll also find a solution in this case,” Altmaier told Ard public television.