Lufthansa closes in on €9b state rescue deal

A Lufthansa Airbus A380-800 aircraft lands at Frankfurt Airport in Germany April 29, 2019. — Reuters pic
A Lufthansa Airbus A380-800 aircraft lands at Frankfurt Airport in Germany April 29, 2019. — Reuters pic

BERLIN, May 21 — Lufthansa is in advanced talks over a €9 billion (RM43 billion) state bailout that would see Germany take a 20 per cent stake in its flagship airline, as countries battle to save an aviation industry hammered by the coronavirus pandemic.

Lufthansa said today a deal would involve the government taking two seats on its supervisory board, but it would only exercise its full voting rights in exceptional circumstances, such as to protect the firm against a takeover.

Lufthansa has been in talks with Berlin for weeks over aid to help it cope with what is expected to be a protracted travel slump, but has been wrangling over how much control to yield in return for support.

Sources involved in the negotiations said the government’s economic stabilisation fund had not yet put forward a final offer, but should do so today.

“There are still some unresolved issues to be worked out. As soon as that is done, the management board could give its approval,” said a Lufthansa spokesman.

The supervisory board would then be given two days to examine the proposal. Whether the Lufthansa management board would decide on Thursday or Friday would depend on the talks.

Rivals such as Franco-Dutch group Air France-KLM and US carriers American Airlines, United Airlines and Delta Air Lines have also sought state aid.

Lufthansa said it expected conditions of the deal to include the waiver of future dividend payments and limits on management pay, adding the package would have to be approved by the European Commission.

The plan includes a €3 billion loan from the state-backed bank KfW and a convertible bond, which could be exchanged for a further five per cent stake plus one share in the event of a public takeover offer by a third party.

Lufthansa said it hoped the deal could be concluded promptly to secure its long-term solvency.

German media reported late yesterday that a deal had been done and Chancellor Angela Merkel said she expects an agreement on a rescue package soon, but did not elaborate. — Reuters

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