National carrier Lufthansa will receive a 9 billion Euro coronavirus palliative from the German government to help cushion the economic impacts of the novel pandemic.
It is no news that the coronavirus pandemic has a catastrophic impact on businesses worldwide particularly on airlines and travel agencies. Since the virus became endemic, as announced by the WHO in January 2020, almost all world governments closed down their borders with widespread restrictions in travels. As the world grapples with a crippled global economy, the German government has taken the responsibility to roll out a coronavirus rescue package to help airline company Deutsche Lufthansa AG (ETR: LHA), to cushion the effect of it.
Coronavirus in Germany
The coronavirus disease also known as COVID-19 was first recorded in Germany near Munich on the 27th of January, 2020. Currently, Germany has over 180,000 confirmed cases with a record of more than 8,000 deaths thus far. The German government has come under mild appraisal owing to the relatively low fatality of the Covid-19 when compared to the disease epicenters in Europe namely Italy and Spain with over 32,000 and 28,000 deaths respectively. The death toll may differ but measures put in place to cushion the effect of the pandemic are similar across all countries entailing the closure of businesses and transferring operations to working from home. While these measures can work in some industries, it obviously is not applicable in others.
Rescue Package for Lufthansa
Lufthansa is a German flagship airline transportation company and travel agency based in Cologne Germany whose operations have been crippled by the outbreak of the coronavirus disease. The airline has grounded over 95% of its fleet which has contributed to a massive dip in revenue. Skeletal operations for movement of essential service providers are still ongoing but these are more humanitarian and cannot equate the big loss the company faces.
Lufthansa and the German government have been in talks for several weeks to fashion out a rescue package to help the airline and on Monday, the agreement was reached. This 9 billion Euro coronavirus bailout will see the German Government own a 20% stake in the company. According to sources, the conditions of the bailout include “the waiver of future dividend payments and restrictions on management remuneration.” Whatever the conditions for now, there is hope that the company will survive this pandemic as it plans to increase the number of active aircrafts in operations by the end of the week.
Meanwhile, today Lufthansa (LHA) stock is trading at 8.47 EUR, which means that it is 5.32% up. But it is around 50% lower than at the beginning of the year.
Worldwide Airline Bailout Trend
As the COVID-19 pandemic is a global saga, Lufthansa is just one of many airlines receiving similar bailout funds. Airlines such as United Airlines Holdings Inc (NASDAQ: UAL) received a bailout of $5 billion of taxpayer’s money. This trend as seen globally will serve as a vital reference point to depict how much economy sustaining air transport providers have to suffer due to the coronavirus.
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