Germany donates billions to save Lufthansa

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German government is ready to allocate 9 billion euros to Lufthansa, but it must comply with several conditions, including climate protection.

The German authorities will provide the air carrier Lufthansa, which, like many of its competitors, is experiencing serious financial difficulties due to the coronavirus pandemic, with a package of assistance worth a total of 9 billion euros. On Monday evening, May 25, this was announced by the management of the concern, as well as representatives of the German government.

However, this step still needs to be approved by the European Commission, the Lufthansa Supervisory Board and the General Meeting of Shareholders.

According to the German Ministry of Finance, as one of the conditions for receiving aid the concern has pledged to renew its fleet to reduce harmful emissions into the atmosphere. In addition, the concern is expected to make significant salary cuts for its board members and managers.

Sources of financial aid for the Lufthansa Group

Lufthansa will receive a three-year loan of 3 billion euros from the state bank KfW and several private banks.

The Economic Stabilisation Fund (WSF) will provide the group with €4.7 billion in a termless, tacit deposit at 4 percent in the first two years and 9.5 percent in the following years. This fund was created by the German government during the COVID-19 pandemic so that, if necessary, the state could acquire stakes in large companies that were on the verge of bankruptcy because of the crisis.

The state plans a second tacit contribution of 1 billion euros, and for another 300 thousand euros WSF will acquire a 20 percent stake in Lufthansa.

The state will get seats on the supervisory board.

The German government has confirmed that after the adoption of the financial aid package, the state will receive two seats on the supervisory board of Lufthansa. They will be taken by independent experts, said in a statement of the German Finance Ministry.

At the same time Germany’s allocation of such a large amount of funds to save the air carrier from bankruptcy may lead to problems with the European Commission. Brussels is afraid of failure to meet the criteria of fair competition in the European market and will put forward its own tough terms. German Chancellor Angela Merkel has already announced in this regard that she is ready for a “tough battle”.

The Lufthansa Group employs around 138,000 people.