Close sidebar

Lufthansa to begin paying back €9bn state aid

written by Isabella Richards | September 20, 2021
A Lufthansa Airbus A380. (Rob Finlayson)
A Lufthansa Airbus A380. (Rob Finlayson)

Germany’s Lufthansa will begin paying back bailouts funded by the state last year to keep the company afloat during the pandemic, after a strong rebound in European travel.

The Frankfurt-based airline is launching a US$2.51 billion capital increase underwritten by 14 banks that will assist the company to pay back what it drew from Germany’s Economic Stabilisation Fund (ESF).

The business’ executive board approved of a shares issue, which will run from 22 September to 5 October.

Advertisement
Advertisement

The airline will use the net proceeds to pay a portion of the €9 billion in bailouts European governments gave last year – which resulted in the ESF now owning a 15.9 per cent stake in Lufthansa.

“We have always made it clear that we will only retain the stabilisation package for as long as it is necessary,” said Carsten Spohr, CEO of Deutsche Lufthansa AG.

“We are therefore proud that we can now deliver on our promise and repay the measures faster than originally expected.”

An additional €1 billion will be paid to the state by the end of 2021.

The company has also repaid an additional €1 billion to the German financial firm KfW.

PROMOTED CONTENT

Once the loan is fully repaid, the ESF has committed to selling its current stake no more than two years later.

Lufthansa said the new capital increase will protect over 100,000 employees’ jobs.

As European travel has recorded a strong rebound, Lufthansa is operating at almost pre-pandemic levels, with load factors exceeding 70 per cent in August, according to the airline.

The company said bookings are substantial and it expects passenger numbers to reach half of 2019 levels in coming months.

Last year, Lufthansa – like all airlines globally – was forced to ground its fleet and halt most services, resulting in an operating loss of €6.7 billion.

Many carriers received state aid to maintain stability during the pandemic, and Lufthansa has led the way with being one of the first airlines to begin repaying.

When the loan to Lufthansa was announced in 2020, Irish carrier Ryanair’s CEO Michael O’Leary intended to lodge an appeal against the aid.

He claimed Lufthansa was “addicted” to state loans and said it would illegally “distort competition” over the next few years.

Ryanair also lodged an appeal against other European competitors – including Finnair – despite the low-cost carrier receiving €600 million in aid from the UK.

After continuous quarterly losses, Lufthansa expects the third quarter will be positive following the company’s strong operating performances.

Lufthansa Group also expects to take delivery of up to 30 new aircraft per year going forward, to which over half will be leased.

Leave a Comment

Your email address will not be published. Required fields are marked *

Each day, our subscribers are more informed with the right information.

SIGN UP to the Australian Aviation magazine for high-quality news and features for just $99.95 per year