German Government agrees to Lufthansa Package

German Government agrees to Lufthansa Package

The German government has agreed to rescue package for the second largest European airline Deutsche Lufthansa AG. As aviation industry is facing one of the biggest crises in its history, aviation experts are not ruling out a long road to recovery for the sector even when the flights are fully operational. Tourism sector will be impacted and the number of tourists might take a long time to return to pre-COVID levels.

As per Der Spiegel magazine report, officials were in touch with airline managers to sign the bailout package for the biggest German airline. The German Finance Ministry has not commented on the development. Lufthansa management had indicated in April that the airline would need help from government to deal with the slump in business caused by COVID-19 lockdowns.

As per another report published by a German newspaper Handelsblatt, the German government has agreed to a three-stage model involving a total of 9 billion euros ($9.88 billion), including a 3 billion-euro loan from the state-owned KfW bank. In order to save jobs in aviation industry, German government has agreed to help Lufthansa.

German government will own 20% stake in Lufthansa and 5% stake via convertible bonds. The package agreed by Lufthansa and German government includes a non-voting capital component, share capital increase and a secured loan, as per media reports.

As the official confirmation hasn’t been received from government or airline management, media reports suggests that the agreement could be finalized by next week. Airlines have resumed some flights across Europe in the recent days.