Germany bails Lufthansa with $9.8 billion lifeline

Germany bails Lufthansa with $9.8 billion lifeline
  • The bailout gives Berlin a veto in the event of a hostile bid for the airline.
  • Berlin plans to offset the Lufthansa stake by the end of 2023.

The bailout is the largest German corporate rescue since the pandemic as the government seeks to protect jobs and gives berlin a 20% stake, which could rise to over 25% plus in the event of a takeover.

Lufthansa has been grappling with how much control the government will have over its affairs in the aftermath of a finanial bail out.

The finance and Economy Ministries on Monday said the act was to shield jobs from going extinct as the airline grappled with low demand which had plummeted its market value. The airline anticipates quick recovery as shares closed up 7.5% at 8.64 euros,

Minister Olaf Scholz said of the deal, under which Germany is buying new shares at the nominal value of 2.56 euros apiece for a total of about 300 million euros.

Berlin, which has set up a 100 billion euro fund to salvage jobs hit by the coronavirus crisis, said it plans to offset 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.

How will Berlin overseer Lufthansa's business operation?

Conditions of the deal include the waiver of future dividend payments and limits on management pay, Lufthansa said, adding that the government will also fill two seats on its supervisory board, with one becoming a member of the audit committee.