German airline Lufthansa (LHA.DE) has reportedly hammered out the final details of its €9bn (£8.05bn) state bailout, which it urgently requires to survive after the coronavirus pandemic brought the aviation sector to a standstill.
The bailout offer is believed to include a government-backed €3bn loan from Germany’s KfW state bank.
German news agencies reported earlier that the deal had already been struck. However, according to government spokespeople at a news conference in Berlin this afternoon, the negotiations are in their very final phases.
The bailout package also requires approval by Germany’s Economic Stabilisation Fund committee and the EU commission.
Lufthansa had slashed its flight schedule by 95% by mid-April, grounding 700 planes and putting 87,000 staff on short-time hours. It said it is losing €1m an hour.
Chief executive Carsten Spohr has repeatedly warned that the airline industry will not survive the coronavirus crisis without state aid.
Negotiations between the government in Berlin and the Frankfurt-based airline have dragged on for weeks, as the government’s insistence on a 20% stake in the company proved to be a sticking point.
Lufthansa has been fully privatised since 1997 when it sold the last state-owned shares. Now, 23 years on, the government wants to take a 20% stake and a convertible bond that would enable it to take another 5%.
German economy minister Peter Altmaier said on Sunday evening that the government would only increase its stake, "only if it comes to preventing takeover attempts."
“As soon as Lufthansa is back in the profit zone, these funds have to be repaid,” Altmaier said.
Lufthansa said last week that the bailout conditions may also include the waiver of future dividend payments and restrictions on management pay. It already suspended its 2019 dividend payment.
A source told German news agency DPA that a timeframe also needs to be agreed for the German government sell its stake in the airline again.
The Lufthansa Group also owns Swiss Air, Austrian, and Brussels Airlines. Brussels Airlines announced last week that it was cutting its workforce by one-quarter, which equates to around 1,000 jobs.
Lufthansa announced at the weekend that it would resume flights from mid-June to 20 destinations.
Earlier this month, the European Union approved a €7bn state bailout for Air France-KLM (AF.PA).