Lufthansa announces talks with German government for rescue package

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Lufthansa announces talks with German government for rescue package

German air carrier Lufthansa announced it was carrying out talks with Germany’s economic stabilisation fund for a rescue deal totalling about $9.9 billion (nine billion Euros). This deal, if realised, would include the government taking control of about 20 per cent of the airline’s ownership.

In its statement announcing these ongoing discussions, Lufthansa mentioned that the government would also hold two seats in the company’s supervisory board. However, it added that the government representatives in the board could not exercise their voting rights except in certain circumstances such as in order to protect the company rights against a takeover.

According to reports about the terms of the fund, the government is expected to give the airline a loan of three billion Euros from the national bank KfW. A convertible bond will also be offered and the company will have the option to exchange it for a five per cent stake and one share in case a third party offers for a public take over of the airline.

Other terms of the rescue package are reported to include waiving of future payments of dividends and a cap on compensation paid to the company management. Despite the negotiation involving Germany and Lufthansa, the European Commission will need to approve it in order for it to be passed.

The discussion and negotiation for this rescue bid have been ongoing for a while with the company being reluctant to agree to a deal that would see it lose more control over its operations to the government. As other aircraft carriers that are bearing the brunt of the pandemic, Lufthansa, too, is hoping that help from the state would ensure it to tide over its problems and maintain operations in the long term.