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Lufthansa's €9 billion bailout takes off as majority shareholder gives green light

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A Lufthansa aircraft approaches the airport in Frankfurt, Germany, Tuesday, June 23, 2020
A Lufthansa aircraft approaches the airport in Frankfurt, Germany, Tuesday, June 23, 2020   -   Copyright  AP Photo/Michael Probst
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Lufthansa's majority shareholder has approved a €9 billion rescue plan proposed by the German government.

Speaking to German newspaper Frankfurter Allgemeine Zeitung, Heinz Hermann Thiele said he will vote for the draft agreement at an annual shareholder meeting on Thursday.

He had initially threatened to block the deal, fearing the government would halt the job cuts that he thinks are necessary to restructure the company and get its share price rising again.

Lufthansa, however, had already warned that without support it would "certainly be in default a few days after the general meeting" and should declare bankruptcy.

The 79-year-old businessman retains 15.5% of the company. If the plan is approved, the government will become the majority shareholder, holding 20% of the carrier.

Lufthansa was hit hard by the coronavirus crisis. It has already planned 22,000 job cuts, 16% of its global workforce, half of the losses in Germany.

During lockdown, it grounded almost its entire fleet for two months.

Negotiations are still underway with trade unions, but a first agreement was signed on Wednesday between Lufthansa and UFO, the cabin crew union.

"The package includes four-year protection against dismissal and savings of over half a billion euros by the end of 2023. A large part of this comes from voluntary measures", UFO said, adding though that it still has to agree on "the forthcoming bailout" package.

Another German union, Verdi, welcomed the decision of Lufthansa's shareholder, which "ensures the survival of the company and prevents a default."

Other bailouts, regarding Lufthansa's subsidiaries, are underway in Europe.

Austria Airlines will receive €450 million from the Austrian government, although it will not buy any of its shares.

Switzerland will instead guarantee €1.2 billion in loans to Swiss and Edelweiss Air.

In Belgium, negotiations are still underway as Brussels Airlines is planning to cut a thousand jobs.

Lufthansa will also close Germanwings and the German branch of SunExpress, jointly owned with Turkish Airlines.