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Germany makes astonishing profit on Lufthansa rescue

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Germany makes astonishing profit on Lufthansa rescue

Old 16th Aug 2021, 14:42
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Germany makes astonishing profit on Lufthansa rescue

14 months ago the German government bought 25% of LH shares to support the company. At the time they paid € 2.56 and they are selling close to 30 million ( 10% of LH ) in the coming weeks. The current price is € 8.90 ( the news knocked almost 4%off the price).

Even so, 250% profit in just over a year would be a phenomenal return for any hedge-fund manager, but for a government ?

Just speechless.

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Old 16th Aug 2021, 15:25
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Itís astonishing probably because in the UK our Governmentís approach would be the opposite, buying them at an inflated price and selling them at a huge loss, enriching donors and contacts with the taxpayer picking up the bill
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Old 16th Aug 2021, 16:07
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LH could not get the capital needed from other sources during the worst part of the crisis. It's a solid company serving a robust market that is guaranteed to return. Not having come to the rescue would have been the expensive thing to do. Germany needs Lufthansa to operate and connect foreign markets and airports need it's business too. Lufthansa partially hated to have the federal government being the co-owner because it was blocked from doing certain more radical restructuring while being state owned. This is why some people even suggested LH better should volunteer to file for chapter 11 to drop old obligations.

Last edited by Less Hair; 16th Aug 2021 at 17:48.
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Old 16th Aug 2021, 18:08
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At the time we arrived at the end of the first lockdown, LH were one of the few airlines flying. I certainly made use of them when I had to get overseas to be with a dying parent. They were particularly helpful as well.

Certainly living in the north of England, they are a far more useful airline than 'London Airways' whose connections between MAN and LHR are dire, the staff at the gate are always officious (pardon me for breathing but I have three tired young children with me after a long flight and we wish to sit down here so we don't miss our flight home) and the trek through Terminal 5 makes connecting through FRA feel like a walk in the park.
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Old 16th Aug 2021, 19:06
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Totally agree with you re LH and their service out of Manchester. BA have lost the plot as far as the rest of the country are concerned, or at least that bit of it north of Watford Gap. The only airlines I use on a regular basis are LH/SQ/EK and all three are a country mile ahead of BA. LH indeed flew through the pandemic, and I used them to go too and from Germany, and further afield though the route from Munich was not quite so straight forward , thankfully back to normal now. I am with them Sunday, and then later next week with them again down to Madeira, with Mrs Mac on Jet 2 from Man for some R&R.
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Old 18th Aug 2021, 16:57
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The german government had to make sure with that rescue deal that they do make a profit. That is one lesson they learned from the financial crisis where they rescued a few banks and made huge losses on that rescue, in fact they still hold quite substantial ownership of at least one bank (Commerzbank) without any chance to recoup their rescue money any time soon. The same would have been impossible to do again, and even the Lufthansa deal that was agreed after quite a bit of negotiation was not seen all that favourable by the voting public. But buying shares was only a small part of the whole rescue deal, there were two other substantial parts, a huge loan and a direct equity injection (not bound to shares).
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Old 18th Aug 2021, 17:39
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One lesson learned from rescuing the banks was that bonus payments were forbidden during the state assistance phase. This seems to have helped motivating senior management wanting to return fast to routine market financing and getting rid of the federal government.
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Old 10th Sep 2021, 17:58
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Reviving the entire thread, I must say that I agree with Less Hair. During that period, motivation was all that the senior management needed so that they could overcome quickly and get back to their normal activities. I have researched some of the articles where the experts have highlighted that Lufthansa collected a revenue of only 16.6 billion US dollars in the fiscal year of 2020. This is obvious as most of the flights were grounded. The economic stabilization fund of Germany would start selling down its stakes in the coming weeks so as to fully dispose it by the end of 2023. It is really good to know that the Government is on the verge of exiting and as such, it is possible for Lufthansa to generate more cash even if the number of passengers is lower.
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