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Lufthansa to Raise $2.5 Billion to Repay State Bailout Funds

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SEPTEMBER 19, 2021

Grounded Deutsche Lufthansa AG Aircraft Ahead of Earnings

Deutsche Lufthansa AG plans to raise 2.14 billion euros ($2.5 billion) to repay part of a German government bailout that helped the national carrier through the coronavirus pandemic.

The company will issue new shares at 3.58 euros each, according to a statement on Sunday, or less than half Friday’s closing price of 8.21 euros. The deal will be underwritten by a syndicate of 14 banks with support from funds controlled by Blackrock Inc., the carrier said.

The move will help Lufthansa remove the state from its shareholder list about 18 months after it took a stake, something Chief Executive Officer Carsten Spohr has been striving to do ahead of German elections next week. The carrier will just miss the target, with stock being offered from Sept. 22 to Oct. 5.

“We have always made it clear that we will only retain the stabilization package for as long as it is necessary,” Spohr said in the statement. “We are therefore proud that we can now deliver on our promise.”

Germany agreed to provide a 9-billion euro bailout to Lufthansa at the start of the pandemic, when the carrier was forced to ground its fleet and made a record loss. Repaying the aid would free the company from restrictive conditions the European Commission attached to its approval of the deal, such as a ban on dividends, management bonuses and any purchase of a stake of more than 10% in a rival airline.

Italy’s troubled flag carrier Alitalia is dying and being reborn as a new airline called ITA.

Election Urgency

The urgency to pay back the funds before the election came as Chancellor Angela Merkel’s conservatives lost ground to Olaf Scholz’s Social Democrats, a party that has been expected to hold on to the Lufthansa stake for longer. Should Scholz replace Merkel, as polls suggest, he’s also likely to be caught up in lengthy negotiations to form a coalition.

European carriers such as Lufthansa are now starting to recover from the crisis after more than a year of near-stagnant air travel. Capacity at the German group’s various airlines is back to more than half of pre-crisis levels, with planes flying more than 70% full in August, the company said.

Lufthansa expects passenger numbers to reach about half of 2019 levels over the coming months, the carrier said, supported by a recovery in business travel. The boost in cargo traffic that came as a rare blessing for airlines during the pandemic is persisting.


Courtesy/Source: Bloomberg

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