Lufthansa (LH, Frankfurt International) has cleared two remaining formalities for its EUR9 billion euro (USD10.1 billion) bailout after both shareholders and the European Commission approved the measure.

During an Extraordinary General Meeting on June 25, 98% of the attending shareholders of the German airline voted in favour of the bailout. Although the turnout of the shareholders was low, with just 39% of the total share capital represented, the result of the vote is binding as it garnered the required two-thirds majority.

"The decision of our shareholders provides Lufthansa with a perspective for a successful future. On behalf of our 138,000 employees, I would like to thank the German federal government and the governments of our other home countries for their willingness to stabilize us," Chief Executive Carsten Spohr said.

The approval of the shareholders was not certain as the main shareholder, Heinz Hermann Thiele, who holds an over 15% stake in Lufthansa, expressed his concern about the state's influence on the airline. Under the terms of the bailout, the German government will initially acquire a 20% stake in the carrier after the purchase of newly issued shares. The stake could grow to 25% in the future. However, the state vowed to refrain from voting on issues other than takeover attempts.

The German government will provide EUR6 billion (USD6.74 million) through its COVID-19-specific Economic Stabilisation Fund (WSF), including EUR5.7 billion (USD6.4 billion) through repayable silent participation (convertible to a 5% stake under certain conditions) and EUR300 million (USD336 million) through a capital increase. The remaining EUR3 billion (USD3.37 billion) will be injected as a bridge loan from state-owned development bank KfW.

Shortly before the EGM commenced, the European Commission announced that it had cleared Lufthansa's bailout under its State Aid Temporary Framework, a set of rules governing state aid granted in relation with the COVID-19 pandemic.

"This substantial amount of aid will help Lufthansa weather the current coronavirus crisis, which has hit the airline sector particularly hard. But it comes with strings attached, including to ensure the State is sufficiently remunerated, and further measures to limit distortions of competition. In particular, Lufthansa has committed to make available slots and additional assets at its Frankfurt International and Munich hub airports, where Lufthansa has significant market power. This gives competing carriers the chance to enter those markets," Commission Executive Vice-President Margrethe Vestager said.

The approval paves the way for the completion of bailout procedures for Lufthansa's subsidiaries Swiss (LX, Zurich) and Austrian Airlines (OS, Vienna). The German parent said that decisions in that regard "will be made in the near future".

Ryanair (FR, Dublin International) has vowed to appeal against the Commission's approval of state aid for Lufthansa.

"This is a spectacular case of a rich EU Member State ignoring the EU Treaties to the benefit of its national industry and the detriment of poorer countries. Under the pretext of Covid-19, the German Government is giving Lufthansa a bank-breaking bailout of EUR9 billion which even the airline's own CEO admits it does not need. In clear breach of European competition rules, Berlin is wasting vast amounts of taxpayers' money to prop up an uncompetitive airline," the LCC's Chief Executive Michael O'Leary said.

In separate news, Lufthansa also announced a deal with its largest union of cabin crew members, the Independent Flight Attendants' Union (UFO), to cut costs by EUR500 million (USD561 million) through the suspension of pay increases, a reduction in flying hours with a corresponding decrease in pay and temporary reductions in contributions to the company pension scheme.