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Lufthansa Receives Aid to Help It Weather the Coronavirus

Lufthansa Receives Aid to Help It Weather the Coronavirus
Jackie Reddy

On Monday, the German state approved a large-scale aid package for its flag carrier, reports Associated Press (AP). Lufthansa has been granted €9 billion ($9.8 billion) in aid in order to help keep it operational in the face of the coronavirus pandemic.

Pandemic Has Had “Significant Impact” On Airline

In a statement back in April, Lufthansa said, “The travel restrictions implemented as a consequence of the global spread of the coronavirus had a significant impact on the Lufthansa Group’s earnings development in the first quarter of 2020.”

As the news agency relates, on April 24th, Carsten Spohr, the airline’s CEO, informed employees that Lufthansa was rapidly losing both large sums of cash and passengers due to the pandemic.

A Lifeline With Restrictions

However, just over a month after these dire warnings, the airline has confirmed the approval of this aid package here.

But as AP reports, this aid could be subject to a number of strict controls. “Conditions include the airline not paying a dividend and restrictions on management pay. The package conditions would also let the government block the possibility of an unwanted takeover,” explains the news agency.

Yet as Peter Altmaier, head of Germany’s Federal Ministry for Economic Affairs and Energy, explained, the German government would not attempt to interfere with the airline’s business or operations and would eventually sell its interests in the carrier. Speaking of the decision to provide the aid package, Altmaier described it as “sustainable and reasonable”.

“We have also ensured that over 100,000 people need not live in fear of imminent loss of their jobs,” he told a briefing in Berlin.

Awaiting Approval By EU And Comments From Lufthansa

While the aid package has been approved by the state, it has been revealed that the German government is still in talks with European Union (EU) authorities in order to have the aid package finalized.

In its statement, the airline confirmed that it had been informed of the approval of the package by Germany’s Economic Stabilization Fund (WSF) and added that its executive board had also approved the aid.

Speaking specifically of the restrictions attached to the granting of the package, Lufthansa stated, “The expected conditions relate in particular to the waiver of future dividend payments and restrictions on management remuneration. In addition, two seats on the Supervisory Board are to be filled in agreement with the German government, one of which is to become a member of the Audit Committee. Except in the event of a takeover, the WSF undertakes not to exercise its voting rights at the Annual General Meeting in connection with the usual resolutions of ordinary Annual General Meetings.”

“The stabilization package still requires the final approval of the Management Board and the Supervisory Board of the company. Both bodies will come together shortly to adopt resolutions on the stabilization package. The capital measures are subject to the approval of an extraordinary general meeting. Finally, the stabilization package is subject to the approval of the European Commission and any competition-related conditions,” it added.

View Comments (2)

2 Comments

  1. Grog

    May 28, 2020 at 2:20 pm

    Lufthansa is doing what Lufthansa does best, eating the sausage from both ends. They’re refusing to process refunds (up to 10 weeks and growing, waiting for refunds. They want 100 billion dollars, but won’t give up anywhere near the fair share of ownership that 100 billion should be able to buy. And now they don’t want to relinquish any slots. The big fat check will be used by them to buy up even more market share as time goes on. I say, Bravo! but the German government should be demanding somewhere between 33% and 49.9% ownership. The German taxpayer is being ripped off while Lufthansa Management and LH Shareholders make a mad dash with everyone else’s cash.

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