Germany makes €760mn profit from Lufthansa rescue

The German government has reaped a €760mn profit from its rescue of Lufthansa at the height of the coronavirus pandemic, underlining the recovery of the country’s flag carrier.

Germany’s Economic Stabilisation Fund spent €300mn on shares in Lufthansa in 2020 as part of a €9bn rescue package for the airline, whose revenues collapsed as the governments closed down air travel in an effort to stop the spread of Covid-19.

The government has been gradually trimming its 20 per cent stake and late on Tuesday disclosed that it had sold its remaining 9.92 per cent holding. It has made proceeds of more than €1bn from selling its entire stake, comfortably exceeding the size of its investment.

Lufthansa repaid the last of its bailout ahead of schedule in November last year, paving the way for Berlin to dispose of its stake ahead of the October 2023 deadline it had set.

As the threat from the pandemic recedes, Lufthansa is on track to make its first annual profit since Covid-19. It generated a net profit of €259mn in the three months to the end of June, compared with a loss of €756mn in the same period last year.

Lufthansa chief executive Carsten Spohr said that “the stabilisation of Lufthansa was successful, and is also paying off financially for the German government and thus for the taxpayer”.

Its shares have significantly outperformed European rivals this year in the face of rising fuel prices and recession fears. Lufthansa has fallen 10 per cent, while Air France-KLM has dropped 30 per cent, British Airways owner IAG is down 33 per cent and easyJet 43 per cent.

The rescue of Lufthansa was one of several for airlines across Europe, including in France and Italy, as governments stumped up billions of euros.

The bailouts underlined the strategic importance governments attached to airlines, which are also significant employers. A willingness of European countries to take equity stakes contrasted with the approach of US and UK governments and led to a backlash from some competitors.

Michael O’Leary, chief executive of low-cost Irish airline Ryanair, said the state support amounted to subsidies that would prop up inefficient airlines and distort competition.

Despite returning to profit last quarter, Lufthansa has not been without its travails this year. The carrier lost tens of millions of euros when its ground staff went on strike in July. This week, pilots agreed to no further industrial action until next year after the airline promised to increase their pay by €980 a month.