Germany's Lufthansa Nationalized Again After 26 Years

German Government Provides 9 Billion Euro Public Funds Support

[Asia Economy Reporter Kwon Jae-hee] Lufthansa, Europe's largest airline, will be nationalized for the first time in 26 years. The airline has agreed to transfer part of its shares to the government in exchange for public funds support from the German government. Initially, Lufthansa requested unconditional bailout funds, leading to difficult negotiations with the German government, which took a stance of "no free handouts," but ultimately accepted the government's proposal.

On the 25th (local time), the German Ministry of Economy announced it would provide approximately 9 billion euros (about 12.179 trillion KRW) in public funds to Lufthansa. This is the largest bailout package for airlines announced by any country since the outbreak of COVID-19. The state-owned development bank, KfW, will provide 3 billion euros (about 4.0596 trillion KRW), and the Economic Stabilization Fund (WSF) will provide 5.7 billion euros. Additionally, WSF will separately purchase 20% of Lufthansa's shares for 300 million euros (about 405.9 billion KRW). As a result, the German government will own Lufthansa again for the first time in 26 years since its privatization in 1994.

Olaf Scholz, German Finance Minister, stated, "Government support will be provided for a limited period," and added, "Once Lufthansa's management normalizes, the shares will be sold by 2023."

The German government plans to dispatch personnel to Lufthansa's supervisory board after obtaining approvals from financial authorities, Lufthansa's board of directors, and the European Union (EU), once the nationalization process is completed. However, it has repeatedly emphasized that it will not interfere with management. Peter Altmaier, German Minister for Economic Affairs, explained, "This is to prevent foreign companies from attempting to acquire Lufthansa at a bargain price by exploiting the COVID-19 crisis," and added, "There will be no management intervention as feared by the company, and this is a measure to protect a national key industry and millions of jobs."

Initially, Lufthansa strongly opposed nationalization, requesting unconditional government support. However, facing severe financial difficulties due to COVID-19, it agreed to partially accept the government's proposal. In the first quarter of this year, Lufthansa's revenue was 6.4 billion euros (about 8.5 trillion KRW), down 18% compared to the same period last year. Operating losses amounted to -1.2 billion euros (about -1.6 trillion KRW). Considering that 95% of Lufthansa's approximately 300 aircraft are currently grounded, the second-quarter performance is expected to be even more bleak. Carsten Spohr, CEO of Lufthansa, recently wrote in a letter to employees, "We are facing the biggest challenge in our 65-year history," and stated, "We are currently losing 1 million euros (about 132 million KRW) per hour."

In addition to the bailout plan, Lufthansa plans to conduct restructuring involving 10,000 employees to restore normal operations, anticipating a difficult recovery over the next few years.

Major European airlines are undergoing nationalization due to the COVID-19 crisis. The Italian government has fully nationalized its flag carrier Alitalia by providing 500 million euros (about 670 billion KRW) in support, and the Portuguese government has also indicated it may pursue nationalization of TAP Portugal.

This content was produced with the assistance of AI translation services.