$9.8 billion for 20% stake: Lufthansa agrees state aid deal

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Lufthansa (LHAB) (LHA) , like many other airlines and airline groups around the world, has seen its world turned upside down amidst the coronavirus pandemic. In a bid to help the company navigate the tough skies, the German government agreed with the airline on a bailout deal.

The German government will provide the Frankfurt, Germany-based carrier with a $9.8 billion (€9 billion) bailout sum for an exchange of a 20% stake in Lufthansa (LHAB) (LHA) , reported dpa, citing government sources.

While the deal still has to be approved by Lufthansa (LHAB) (LHA) ‘s supervisory board and the European Commission, the 20% stake would not grant the government a majority of seats on the supervisory board, which means that it would not be able to veto decisions made by Lufthansa’s (LHAB) (LHA) management.

For the management of the group, the ability to keep its decision-making power was something crucial. The company’s chief executive Carsten Spohr stated that the group needed government support, but it did not need “government management.”

On May 7, 2020, the airline indicated that negotiations were for a 25% plus one share stake.

The plan to provide further state aid, however, had its doubters even before it was granted to the German airline group. Michael O‘Leary, the chief executive officer of Ryanair, a major competitor for Lufthansa Group, was adamant that the company would use any additional aid to further distort the competition in Europe, rather than weather the current storm.

Previously, the airline group also weighed whether to declare self-insolvency and enter bankruptcy proceedings similar to Chapter 11 bankruptcy in the United States, rather than take up state aid.


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