Lufthansa Group Negotiating Bailout

Friday, 8 May 2020

Lufthansa Group Negotiating Bailout

Negotiations are under way between the German government and the airline Lufthansa for a stabilization package valued at €9 billion. 

With multiple options are being discussed, it seems the German government will assume 25% ownership of the business while providing a “secured loan” and becoming a “silent” participant within the Lufthansa Group. In addition to this, the government seeks to place a member of Germany’s Federal Economic Stabilization Fund (SWF) on the Supervisory Board of the airline.

It is unclear how this move will impact Lufthansa’s services as it seems rather contradictory that the SWF wish to have representation within the supervisory board whilst providing “silent participation” at the same time. However, both Air France and KLM are part owned by the French and Dutch governments and neither have done anything drastic to alter operations of their respective airlines.

Much like the carriers in the U.S. and in other areas of the world, it is clear that Lufthansa needs financial support to weather the coronavirus crisis. With demand plummeting amidst border closures and travel restrictions, the airline currently has 700 non-flying aircraft and is said to be losing approximately €1 million per hour.  

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