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It's a deal... Germany will pay handsomely towards Lufthansa's rescuce act, and get a possible 25% stake.Image Credit: Reuters

Germany's Lufthansa agrees to government's $9.8b aid

Deal will also place federal government with a major say in airline's future course

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Frankfurt: Coronavirus-stricken German airline group Lufthansa has agreed in principle a nine billion euro ($9.8 billion) rescue deal with Berlin that would see the government climb aboard as a shareholder.

With mangers and ministers in agreement, Lufthansa's supervisory board and the government's economic stabilisation fund (WSF) must now rubber-stamp the proposal, before shareholders and competition regulator, the European Commission, are asked for their greenlights.

The carrier said last week that it was in advanced talks on a deal that would involve the government taking two seats on its supervisory board, but it would only exercise its full voting rights in exceptional circumstances, such as to protect the firm against a takeover.

Lufthansa has been in talks with Berlin for weeks over aid to help it cope with what is expected to be a protracted travel slump, but has been wrangling over how much control to yield in return for support.

Rivals such as Franco-Dutch group Air France-KLM and U.S. carriers American Airlines, United Airlines and Delta Air Lines have also sought state aid.

Lufthansa has said it expected conditions of the deal to include the waiver of future dividend payments and limits on management pay. The plan includes a 3 billion euro ($3.27 billion) loan from the state-backed bank KfW, Germany taking a 20 per cent stake in Lufthansa and a convertible bond, which could be exchanged for a further 5 per cent stake.