German government to sell 25% of its Lufthansa stake

The German government has announced that it is to sell as much as one-quarter of its stake in flagship airline Lufthansa.

The move was announced by the German Finance Agency, which said the sale would take place in the coming weeks, citing positive developments at the airline.

Following the announcement, shares dropped by 4.9%.

Read more: Lufthansa reports positive cashflow for the first time since pandemic

Berlin acquired its 20% stake in the aviation group last year for €300 million as part of a state aid package to save the Lufthansa group, which also includes Austrian, Brussels and Swiss Airlines, from bankruptcy during the pandemic.

This investment came from the Economic Stabilization Fund (WSF), which was established in March 2020. The fund's core objective was to stabilise major German companies and preserve jobs.

The government help was seen as a temporary fix and Berlin will has said it will sell the complete stake, valued at €1 billion, before the end of 2023.

Both Lufthansa and the German government have indicated they are eager to see the airline regain its financial independence as soon as possible.

Read more: Lufthansa suffers €1bn loss in first quarter

Lufthansa has seen its losses halve in the second quarter of 2021 compared with the same period last year, coming as travel restrictions were eased and passenger confidence in flying returned.

The airline has seen positive cash flow since the start of the coronavirus crisis and is expecting a return to profitability within this year.

Also, in order to shore up finances, the airline went through stringent cost-cutting measures. There have been over 30,000 job cuts, and its 800 aircraft will be cut down to 650 by 2023.

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