Lufthansa will receive a bailout worth 9 billion euros, or $9.8 billion, to help the airline survive an “existential emergency” caused by the pandemic and a virtual shutdown of passenger air traffic, the German government said Monday. The agreement, reached after several weeks of negotiations, will give the government part ownership of the airline for the first time since it was privatized in 1997.

Berlin will take a 20 percent stake and two seats on Lufthansa’s 20-person supervisory board. In the event of a takeover attempt, the government can raise its stake to 25 percent, which would allow it to veto a deal. The anti-takeover provision of the bailout plan reflects fear in Europe that foreign investors, for example from China, will take advantage of depressed stock prices to buy up crucial companies.

“Before the pandemic, the company was healthy and profitable and had good prospects for the future, but it faces an existential emergency because of the current corona crisis,” the government said in a statement. “The federal government’s stabilization package takes into account the needs of the company as well as the needs of taxpayers and employees of the Lufthansa Group.”

Lufthansa, which posted a €1.2 billion ($1.3 billion) first quarter loss, does not expect global aviation to recover from the pandemic for several years. The company is shutting down its discount carrier, Germanwings, and plans to shed 10,000 jobs.

The airline group may also be required to waive future dividend payments. “Lufthansa is committed to pursuing sustainability goals, including renewing its fleet,” the government said, without providing further detail on environmental conditions tied to the bailout.

French state-backed loans amounting to €7 billion ($7.6 billion) given to Air France-KLM last month included new commitments to cut absolute carbon emissions in half by 2024 on its domestic network, compared with 2019. Lufthansa said its management and supervisory boards will “come together shortly” to adopt the resolutions of the rescue package, which are subject to shareholder and regulatory approval.

Todd Horwitz Chief Strategist
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