German Government approved a $9.8 billion aid package for struggling airline Lufthansa to keep an important organization going through the disorder caused by coronavirus pandemic. Officials are still in talks with the European Union’s executive commission about possible conditions.
Peter Altmaier, the German Economy Minister said the aid package is a “sustainable and reasonable” answer to keep the firm going. “We have also ensured that over 100,000 people need not live in fear of imminent loss of their jobs,” he said at an announcement in Berlin.
Conditions comprise of the airline not giving a dividend and restrictions on management pay. The package conditions would also enable the government to block the instance of an unwanted takeover. He said the government wasn’t intending to intervene in the business of running the airline and expects to sell the stake ultimately.
Lufthansa CEO Carsten Spohr told workers that the company was spending cash at the rate of a million euros per hour and that passenger numbers had fallen to 1 percent of previous levels. He said that the airline business was the first sector hit by the virus outbreak and it would be one of the last to exit it.
It is reported that German Chancellor Angela Merkel was opposing a push by the commission to make Lufthansa give up prized landing slots at its Frankfurt and Munich hubs.
Lufthansa, which has dropped most of its passenger business due to travel restrictions during the outbreak, said the government’s fund has accepted to take non-voting holdings in return for $6.22 billion, plus a $3.38 billion credit line and $338 million in share purchases.
That would leave the government fund with a 20% stake in the business and two seats on the board of directors. One of those seats would be on the audit committee. The airline said, however, that the government agreed not to vote at shareholder meetings unless there was a takeover of the company.
The government’s stake is below the level needed to block major judgments, but it has the advantage to raise it to a blocking stake of 25% plus one share in case of an attempted takeover of the organizationLufthansa
Under the package, the government would sell its stake at market price by the end of 2023, on condition that key parts of the aid have been repaid and the government can sell the shares for more than it paid.
The aid package would also need consent by a shareholder meeting.