German Government Converts First Lufthansa Shares Into Cash

Frankfurt — Barely 14 months after buying into Lufthansa in a bid to keep the company afloat during the worst of the coronavirus pandemic, the German government is parting with its first block of shares.

The Economic Stabilization Fund (WSF) intends to reduce its shareholding by somewhere between 15 and 25 per cent in the coming weeks, as it announced in Berlin on Monday.

This means that up to 29.9 million Lufthansa shares, which the German government acquired about a year ago for the nominal value of 2.56 euros (3.02 dollars) each, in order to stabilize the German airline as people stopped flying amid the coronavirus crisis, will come onto the market.

Currently, Lufthansa shares are trading for more than 9 euros on the stock exchanges, meaning Berlin could realize a significant return on its investment. The quarter of the package up for sale is currently worth around 270 million euros.

The direct participation in the company had amounted to 20 per cent of the shares and, with a nominal value of 300 million euros, was the smaller part of the German state aid of up to 6 billion euros.

Added to this was a KfW state-owned investment bank loan that had already been repaid, as well as state aid from Austria, Switzerland and Belgium, so that Lufthansa ultimately had 9 billion euros at its disposal.

With the sale of the first block of shares, which began on Monday, WSF loses the possibility of acquiring a blocking minority in the group via a conversion of the Silent Participation II regulation. This was supposed to prevent a hostile takeover during the crisis, for example.

The federal government justified the move with the positive growth in the company. However, it remains a major shareholder and will continue to accompany the stabilization process.

Lufthansa initially did not want to comment on the transaction. However, chief executive Carsten Spohr had repeatedly emphasized that the government's participation was to be terminated as quickly as possible.

Without the aid, Lufthansa would have had to file for insolvency last year, according to its supervisory board chairman, Karl-Ludwig Kley.

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