Lufthansa shares jump after board approves €9bn government bailout
Lufthansa shares jumped nearly six per cent this morning after its supervisory board approved a €9bn (£8bn) government bailout.
Europe’s largest airline has been forced to give up some of its landing slots to rivals as a condition of the deal.
Lufthansa shares rose nearly six per cent to €9.65 this morning.
The deal still needs to be approved by shareholders as it will dilute their shareholdings in the company.
Lufthansa turned to the German government after covid-19 grounded flights.
The company expects its fleet to be 100 aircraft smaller following the shutdown which could lead to as many as 10,000 lost jobs.
The EU still needs to approve aspects of the deal which will make the German state the largest shareholder in Lufthansa.
The bailout, which is the largest German corporate rescue since the start of the coronavirus crisis, will see the government take a 20 per cent stake in the airline, which it intends to sell by the end of 2023.
The stake would rise to 25 per cent plus one share in the event of a hostile takeover, in a move designed to protect thousands of jobs.
The move comes after weeks of wrangling between Lufthansa and Berlin over how much control the airline was willing to give up in exchange for vital support to survive a slump in passenger demand during the pandemic.
The deal, which will see the government buy roughly €300m worth of shares, requires Lufthansa to waive future dividends payments and place limits of executive pay.
The government will also take two seats on its supervisory board, including one member of the audit committee.
Under the bailout package Berlin will also inject €5.7bn in non-voting capital, known as a silent participation.
Lufthansa will separately receive a €3bn three-year loan from state-backed KfW and private banks.
As part of the deal, Lufthansa will reduce its aircraft by four in both Munich and Frankfurt and give up enough landing slots for 12 daily return flights.