German government agrees E9b bailout for Lufthansa

Lufthansa is to receive a rescue package worth a total of E9b from the German government, which will own at least a fifth of the carrier almost a quarter of a century after it was fully privatised. The aid, which is subject to approval by the EU and shareholders, will include E3b in loans via KfW, the country’s state-owned development bank, and will preclude the airline from paying dividends and constrain executive pay. The country’s Economic Stabilisation Fund will pay E300m to buy new shares in the group at the nominal price of E2.56 a piece, bringing its stake to 20% and diluting existing investors. The German government has committed not to exercise its voting rights in day-to-day matters, and plans to sell its stake by the end of 2023. However, Berlin will nominate two people to sit on Lufthansa’s supervisory board. The fund will also invest a further E5.7bn in the airline, in the form of equity capital which carries an initial coupon of 4 per cent that rises to 9.5% by 2027. The investment can be paid down by Lufthansa in whole or in part on a quarterly basis and gives the German government no further control of the company. A portion of that investment can be exchanged for a further 5% of Lufthansa, in the case of the airline missing interest payments, or for 5% plus one share, in order to block any attempts at a hostile takeover. The deal announced on Monday — by far the largest bailout in Germany since the outbreak — must still be ratified by shareholders at an extraordinary general meeting, and be given the green light by the EC. Despite demands from environmental activists and some political parties, it does not impose new carbon emission targets on Lufthansa. Peter Altmaier, Germany’s economics minister, said: “We have deliberately refrained from imposing conditions beyond the broader sustainability requirement, because our aim is not to have the state determine the company’s day-to-day business strategy.”<br/>