lufthansa-rescue-wingmag©tim-dennert

Lufthansa Rescue: all important details summarized

Johanna Koyser
22.05.2020
4 minutes

In view of the corona crisis, one topic in particular has dominated business news in Germany for weeks now: Lufthansa. After all, even the flagship of German aviation has not remained unaffected by the effects of the pandemic. It quickly became clear that Lufthansa would not be able to rescue itself. As a result, the involvement of the German state came under discussion. Intensive debates followed on the advantages and disadvantages of such participation. Today, the Federation’s Economic Stabilization Fund wants to present its offer to rescue Lufthansa to the DAX group. 

State participation of nine billion euros planned

In total, the German state plans to participate in the company with taxpayers’ money totalling nine billion euros. On the one hand, Lufthansa will be granted a loan of three billion euros from the state-owned bank KfW, and on the other hand Germany would like to take a share in Lufthansa. In more concrete terms, this should mean for the Lufthansa rescue: the state wants to take a direct 20 percent share in Lufthansa. At the same time, an indirect participation via convertible bonds is planned, through which the German state can then acquire an additional five percent plus one share. Overall, the German government would thus have a blocking minority. Here, however, things are getting exciting.

Critics want to prevent a nationalization of Lufthansa, consider a right of the German government to have a say in Lufthansa’s business to be wrong and dangerous. They draw comparisons with the nationalization of Alitalia and its consequences. The federal government, for its part, has stated that there is exactly one important reason for the blocking minority: to prevent a hostile takeover. The passive voting rights would only be used in such cases.

What is expected in return for Lufthansa rescue

The consideration for Lufthansa’s rescue by the German state is already known. In addition to the passive voting rights mentioned above, two positions on the Supervisory Board of the ailing company are to be filled by the Economic Stabilization Fund. Furthermore, restrictions on managerial salaries are expected, as well as a dividend freeze. It is assumed here that no money will be distributed to shareholders until the loan is repaid.

It is not clear at this point in time whether a Lufthansa rescue will take place under these conditions. What is clear is that the German government will now present its plans to Lufthansa. In order for the rescue to come about, Lufthansa’s management and supervisory board would first have to give their approval. In addition, the committee of the Economic Stabilization Fund, in which various representatives of the German government sit. Finally, the approval of the EU Commission would also be required. As you can see, there are still many factors in this chain that could lead to the failure of this Lufthansa rescue. We at WingMag will stay tuned and report any news.

Bild © Tim Dennert

by Johanna Koyser

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