German flag carrier Lufthansa is negotiating a bailout package from the German government worth €9 billion according to airline – or what it refers to as a ‘stabilization package’ which would be offered from the Federal Economic Stabilization Fund. The bailout would be used to help fund the entire Lufthansa Group which also includes Austrian, Brussels Airlines, Eurowings and SWISS.
Lufthansa confirmed reports that the German government was in talks to take a stake in the airline group as a condition of offering taxpayer money – up to 25 per cent plus one share. The government is also seeking a place on Lufthansa’s supervisory board and any deal would ban shareholder dividends for a period of time.
The airline group’s chief executive Carsten Spohr has been resistant to accepting a bailout with too many conditions, telling investors that the Lufthansa Group needed “government support, but we do not need government management”.
“Up until the Corona Pandemic, we as the Lufthansa Group were competitive and successful. We were hit by this crisis through no fault of our own,” Spohr told shareholders.
“Even in the federal government in Berlin, nobody wants a state-controlled management,” Sphor continued.
But he has argued that without a bailout the Lufthansa Group would be up against tough competition from airlines that had received government support – creating an imbalance that Lufthansa would struggle to compete against.
The confirmation that talks were ongoing can be seen as Sphor stepping back from a threat to let the airline group fall into administration as a way of avoiding government help with too many conditions attached. Lufthansa is also in talks with the Austrian, Belgian and Swiss governments for further financial support.
Lufthansa says it is currently burning through €1 million every single hour of every day because of the Corona-crisis. The airline has grounded more than 700 aircraft and doesn’t expect demand to return to 2019 levels until 2023 at the earliest.
