Germany, Lufthansa Agree on $9.8 Billion Bailout -- Update
25 Mai 2020 - 10:38PM
Dow Jones News
By Ruth Bender
BERLIN -- The German government and Deutsche Lufthansa AG said
Monday they have agreed on a EUR9 billion euro ($9.81 billion)
bailout deal -- one of the biggest aid packages by a single country
hatched so far in the pandemic-hit air travel sector.
The deal, widely expected and weeks in the making, comes after
the world's largest airlines have grounded a majority of their
flights as most borders remain closed to contain the novel
coronavirus. Airlines are furloughing or laying off tens of
thousands of staff and negotiating bailouts with their
governments.
"This is an important step as it's about more than 100,000 jobs,
about preserving Germany's leading position in global civil
aviation and about making sure that a healthy and tradition-rich
company that got into trouble because of the coronavirus pandemic
can exist also in the future, " Economy Minister Peter Altmaier
said Monday.
Under the deal -- which still needs approval from Lufthansa's
boards, shareholders and the European Commission -- the German
government will take a 20% stake in the company and appoint two
supervisory board seats.
The agreement caps a weekslong tug of war between Lufthansa's
management and the government over how much control the latter
should be given in return for financial support.
Lufthansa Chief Executive Carsten Spohr had warned against too
much state influence on business decisions. Germany's
economic-stabilization fund, or WSF, agreed not to exercise its
voting rights except in the event of a takeover, which would allow
it to raise its stake to a blocking 25% plus one share. Mr.
Altmaier said the deal would prevent foreign investors from taking
advantage of the crisis.
WSF will build its 20% stake through a capital increase,
acquiring new shares for a total of about EUR300 million in cash,
Lufthansa said.
The EUR9 billion also includes an equity injection by the
government of up to EUR5.7 billion in the form of a silent
participation that is unlimited in time and can be repaid by
Lufthansa on a quarterly basis in whole or in part, as well as a
EUR3 billion loan from state-backed bank KfW, of which EUR600
million will come from private banks.
Mr. Altmaier said the government was still in talks with the
European Commission, the European Union's competition watchdog,
which could impose conditions on the deal. He declined to comment
on details of the talks.
In the U.S., the $2.2 trillion federal stimulus bill known as
the Cares Act included $25 billion in grants for passenger airlines
to keep paying workers' salaries and benefits through September.
The 12 larger passenger carriers are required to repay 30% of the
grant money, and provide warrants that could be converted to stock
later. In addition, airlines can seek another $25 billion in
government loans.
American Airlines Group Inc. is receiving $5.8 billion in grants
and loans from the federal government to cover payroll. It has
applied for another loan of $4.75 billion and has said it is still
negotiating with the Treasury over collateral and terms. United
Airlines Holdings Inc. is receiving $5 billion in grants and loans
to cover payroll, and has applied for another loan of as much as
$4.5 billion.
Delta Air Lines Inc. is set to receive $5.4 billion in payroll
support and is eligible for another $4.6 billion in loans.
Southwest Airlines Co. is receiving $3.3 billion in funding to
cover payroll and has said it would apply for a $2.8 billion
loan.
German daily Handelsblatt reported earlier that Germany was
resisting a push by the commission to have Lufthansa give up
important landing slots at its Frankfurt and Munich hubs. A
spokeswoman for the commission declined to comment.
Write to Ruth Bender at Ruth.Bender@wsj.com
(END) Dow Jones Newswires
May 25, 2020 16:23 ET (20:23 GMT)
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