Germany to sell quarter of its stake in Lufthansa airlines

Published : August 17, 2021 18:24 IST

Lufthansa wants to regain fiscal independence as soon as possible. Photo: Henning Kaiser/dpa/picture alliance

Shares in Lufthansa drop after the German government’s announcement that it will be selling a quarter of its stake in the airline. The complete stake will be sold before the end of 2023.

Germany has announced plans to sell up to a quarter of its stake in Lufthansa. The German Finance Agency said the move would take place in the coming weeks and cited positive development at the airline.

Shares fell as much as 4.9% following the announcement. The state's 20 per cent stake was acquired for €300 million ($353 million).

Lufthansa bailout

The aviation sector was among the hardest hit by the coronavirus pandemic. The Federal Government announced the 20% stake initially to help the airline mitigate the effects of the global pandemic.

This investment came by way of the Economic Stabilization Fund (WSF), which was established in March 2020. The fund's core objective was to stabilize major German companies and by doing so, preserve jobs. Out of a total €9 billion bailout package, €5.7 billion was a silent capital contribution from the state, along with a €300 million share package. The remaining €3 billion would be lent by state-owned development bank KfW.

The bailout effectively saved the airline from bankruptcy in June 2020. The aid was to be a temporary measure, and the WSF said it would be selling the complete stake, currently valued at $1 billion, before the end of 2023. Both the German government and the airline have indicated that they want the company to regain fiscal independence as soon as possible.

National carriers' cost-cutting measures

Lufthansa managed to halve its losses in the second quarter of 2021 compared with the same period last year. That came as travel restrictions began easing and more passengers took to the skies.

The airline has seen positive cash flow since the start of the coronavirus crisis and is expecting a return to profitability within this year. The airline has also undergone stringent cost-cutting measures to help shore up finances. There have been more than 30,000 job cuts, and the fleet of 800 aircraft will be whittled down to 650 by 2023.

kb/rs (dpa, Reuters)

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