Lufthansa repays German government bailout ahead of schedule.

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4 years ago

Deutsche Lufthansa AG repaid the last part of its 9 billion-euro ($10.3 billion) bailout ahead of schedule, paving the way for the German government to sell its stake in the airline group.

The remaining 1 billion euros in loans were repaid on Friday, and the company wrote off the unused portion of its aid package, Lufthansa said in a statement. The repayments mean the German government can begin selling its 14% stake in the airline starting in six months, with a full exit in two years, Bloomberg reported.

→ Lufthansa returns to profits and generates positive cash flows again.

Lufthansa is taking its final step toward a return to normalcy after the coronavirus pandemic grounded much of its fleet and put it on the brink of bankruptcy in 2020. The airline group expects to restore 70% of its pre-pandemic capacity next year as the crisis subsides and intercontinental routes reopen.

While government debt has been repaid, Lufthansa has borrowed heavily from private creditors to replace the aid. Its plan to take pay cuts for its pilots has met with resistance from the powerful union. The company reduced its fleet and pledged to invest less in new aircraft, measures that could leave its Western European business empire vulnerable to cash-rich discounters such as Ryanair Holdings and Wizz Air Holdings.

→ Lufthansa Group studying purchase of additional Airbus A220 aircraft.

“Many challenges remain,” CEO Carsten Spohr said in the statement. “Our ambition is to strengthen our position among the world’s leading airline groups. To this end, we will consistently continue with restructuring and transformation.”

The bailout saved more than 100,000 jobs, Lufthansa said. The debt secured on the financial markets carries a lower interest rate than state loans, which were to rise sharply. State supervision is also accompanied by strict restrictions on merger and acquisition activity and executive compensation.

Once the state exits its stake, Lufthansa will be free to participate in the consolidation that analysts expect will shape European aviation in the wake of the pandemic.