The German government's Economic Stabilization Fund (WSF) has approved a 9 billion euro rescue package ($9.8 billion) for Deutsche Lufthansa AG, the flag carrier announced in a statement.
In the statement on Monday, Lufthansa said the WSF would provide up to 5.7 billion euros in the form of "silent participation" in the company's assets, of which nearly 4.7 billion euros would be classified as equity in accordance with related financial rules, Xinhua news agency reported.
Under German law, "silent participation" is unlimited in time and can be terminated by the company on a quarterly basis in whole or in part.
The WSF will also acquire shares worth about 300 million euros in the form of a capital increase in order to build up a 20 per cent stake in Lufthansa.
It increase its stake to 25 per cent plus one share in the event of a takeover of the company.
Other measures in the package include a syndicated credit facility of up to three billion euros with the participation of state development bank KfW as well as private banks, with a term of three years.
The conditions of the deal include a waiver of future dividend payments and restrictions on management remuneration.
Two seats on the Supervisory Board are to be filled in agreement with the German government, one of which is to become a member of the audit committee, said the company.
Noting that the Executive Board supports the package, the company said it still requires final approval from the Management Board and the Supervisory Board. It is also subject to the approval of the European Commission, the company added.
Lufthansa was healthy and profitable before the pandemic and has good prospects for the future, but it came into an existential emergency due to the coronavirus crisis, the WSF Committee, which consists of representatives of several federal ministries, said in a joint statement.
The government's stabilization package takes into account the needs of the company as well as those of taxpayers and employees of the Lufthansa Group, it said.
The COVID-19 pandemic has caused considerable damage to the aviation industry worldwide, with flights largely grounded due to the travel restrictions imposed by many countries.
Preliminary results released in late April showed that Lufthansa's group revenues fell by 18 per cent to 6.4 billion euros in the first quarter. In March alone, revenues declined by 47 per cent.
The group announced in mid-May that it would gradually resume services in June.
It plans to offer around 1,800 weekly round trips to more than 130 destinations worldwide by the end of June.
( With inputs from IANS )