German Government Wants To Sell 25% Of Its Stake In Lufthansa

The German government is reportedly looking to sell part of its 20% stake in flag carrier airline Lufthansa. The stake was part of the €6 billion ($7 billion) bailout package awarded to the airline to get it through the COVID crisis. The government wants to sell a quarter of its share, citing better performance of the airline in the recent past.

Lufthansa, Loss, Improving
Lufthansa’s state ownership is set to be reduced. Photo: Vincenzo Pace – Simple Flying

Lufthansa’s state ownership could be reduced

Since Lufthansa agreed to its bailout terms over a year ago, the airline has been 20% owned by the government. Now, that’s set to change, as Berlin is reportedly looking to sell around a quarter of its shareholding in the airline. Der Spiegel reports that the finance agency is looking to gradually reduce its ownership over the coming weeks.

In a statement, the German Finance Agency announced that, against the background of positive corporate development at the airline, the WSF would reduce its stake by a maximum of 25%. Sales are flagged to start on Monday.

According to Der Spiegel, the shares were acquired for around €300 million ($350 million) last year. The shares are now thought to be worth more than a billion Euros ($1.18 billion). The statement read,

“After the first successes of the future-oriented measures introduced by Deutsche Lufthansa, the WSF is adjusting its level of participation in a targeted manner, taking into account the interests of both sides.”

Lufthansa Group, North America, Travel Ban
The airline cut its losses by half in its most recent update. Photo: Vincenzo Pace – Simple Flying

The airline has made positive strides in recovering from the pandemic, halving its losses in the second quarter of the year. It is also reducing its fleet and its workforce, as well as restricting its operations to cut costs.

Lufthansa declined to comment on the situation at present.

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A crucial lifeline

For airlines like Lufthansa, the support they have received from their governments has been invaluable to their survival of the COVID crisis. Back in April 2020, the flag carrier was reported to be examining bankruptcy proceedings as its options for survival looked increasingly limited.

However, days later, reports began to surface that the airline group could be awarded as much as €9 billion ($9.8 billion) to keep it afloat during the downturn. At the end of May, the Lufthansa Group announced that it had agreed on an aid package under the Economic Stabilization Fund, or Wirtschaftsstabilisierungsfonds (WSF).

Lufthansa A330
The stake was part of the bailout package awarded to the airline. Photo: Vincenzo Pace | Simple Flying

The aid package was divided into several streams, with €5.7bn ($6.2bn) awarded in the form of ‘silent participation,’ meaning that the WSF would participate in the profit and loss of the airline but would not be involved in third party transactions. In addition to this, the WSF subscribed to shares in the airline, which would be built up to represent a 20% stake in Lufthansa. The WSF further retained the right to increase its shareholding to 25%.

Although the airline boss, Carsten Spohr, had previously said he would rather see the company insolvent than becoming state-owned, the bailout was eventually finalized. On June 25th, the airline’s shareholders voted to accept the terms of the agreement. Although the state ownership was still in the minority, the airline was keen to break free from the bonds of this part of the aid, stating that it would target paying everything back by the mid-2020s.

While the proposed reduction in ownership is not a full pulling out of the state ownership, it’s a step in the right direction.