Lufthansa in advanced talks for state rescue deal worth €9 billion

Marco Green
May 22, 2020

If agreed, the compromise deal would bring the curtain down on weeks of tense negotiations between the company and state officials.

"The German government is in intensive talks with the company and the EU Commission".

Rivals such as Air France-KLM and U.S. carriers American Airlines, United Airlines and Delta have also sought state aid.

Such a step could mean painful job cuts, especially as Spohr has said there are now 10,000 too many staff given the state of Lufthansa's operations. "The goal is an early exit of the state, so that Lufthansa will be able to stand on its own feet again".

Germany's DPA news agency reported Wednesday that Lufthansa shares rose in after-hours trading on the back of rumours that a deal had been reached. The carrier declined to comment. It said in an email that it's aware of the difficulties in the aviation sector and European Union state-aid rules "enable member states to support companies affected by the outbreak".

Handelsblatt reported that Lufthansa would have two days to respond when it is finally offered the deal, while shareholders will have to sign off on the package if bosses accept as it would dilute the value of their stakes.

Government Stake To break the impasse, one scenario that's been under discussion would see the airline sell 9.3% of new shares to the government at a steep discount. Such a move would also give the state upside potential from a rebound in Lufthansa shares.

Lufthansa units in Switzerland, Austria and Belgium, stand to receive some 2 billion euros in additional funds from those countries. The WSF Committee, the airline's Executive and Supervisory Board all have to vote in favor of the rescue package.

Speaking to journalists earlier Wednesday, Merkel said a final decision on the offer to Lufthansa would fall "soon", while a government spokesman told AFP "talks have made a lot of progress, but are not yet complete".

If the plan is finalised, the German government would take up a significant stake of the airline - the second in Europe for number of passengers carried.

Lufthansa executives had raised concerns that the terms on offer would hamstring it against worldwide competitors who've received less stringent bailout conditions, a point the management board repeated in the letter to employees.

Lufthansa said in a statement on Thursday that the deal would involve the government taking two seats on its supervisory board, but only exercising its voting rights as a whole in exceptional cases such as protection against a takeover.

Lufthansa is burning through 800 million euros each month after the coronavirus grounded most of its fleet.

Chief executive Carsten Spohr has said Lufthansa - which also includes subsidiaries Austrian and Brussels Airlines, Eurowings and Swiss - is bleeding "about a million euros in liquidity reserves per hour".

Other reports by Click Lancashire

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