Coronavirus: German government argues over details of Lufthansa bailout

Jill PetzingerJill Petzinger, Germany Correspondent, Yahoo Finance UK
Yahoo Finance UK
Like most global airlines, Lufthanser grounded the majority of its fleet in mid-March, after the coronavirus pandemic caused air travel to collapse. (Boris Roessler/picture alliance via Getty Images)
Like most global airlines, Lufthanser grounded the majority of its fleet in mid-March, after the coronavirus pandemic caused air travel to collapse. (Boris Roessler/picture alliance via Getty Images)

The German government is this week debating the terms of a potential rescue package for its flag-carrier airline Lufthansa (LHA.DE).

According to Reuters, the airline is in the process of finalising a rescue package of up to €10bn (£8.7bn, $10.8bn). One of the topics under discussion is whether the state should have a say in how the company is run under the terms of the financial aid.

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“If companies such as Lufthansa receive billions of euros in state aid from taxpayers' money, the federal government must also be guaranteed a say in the matter,” Rolf Mützenich, parliamentary party leader of the Social Democrats (SPD) told the Bild newspaper.

The SPD are the junior partners of Angela Merkel’s Christian Democrats (CDU) in the federal government in Berlin. However, CDU politician Joachim Pfeiffer, said Lufthansa must have the freedom to make “structural adjustments” to stay globally competitive.

Like most global airlines, the German flag-carrier grounded the majority of its fleet in mid-March, after the coronavirus pandemic caused air travel to collapse.

READ MORE: European stocks rise as countries discuss easing lockdowns

Lufthansa chief executive Carstan Spohr said on 19 March said that the pandemic had “placed the entire global economy in an unprecedented state of emergency.”

“The longer this crisis lasts, the more likely it is that the future of aviation cannot be guaranteed without state aid,” Spohr added.

Spohr said that the company would seek state aid in Germany, Austria, Belgium, and Switzerland — the Lufthansa Group includes Swiss, Brussels, and Austrian Airlines. It has suspended its dividend payment for 2019. 

Germany’s economy minister Peter Altmaier announced today that the federal government and the state of Hesse would extend aid worth €550m to holiday airline Condor.

“The company was operationally healthy and profitable in normal times and has good prospects,” Altmaier said in a statement.

The International Air Transport Association (IATA) said on 14 April that estimated global airline losses from the impact of COVID-19 have risen to $314bn so far this year, which is 25% more than it had previously forecasted.

READ MORE: Coronavirus: Airbus CEO warns cost cuts needed as it's 'bleeding cash'

Airbus CEO Guillaume Faury told staff in a memo on 24 April that the European airplane manufacturer is “bleeding cash” and must rapidly cut costs as its “survival is at stake.”

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