Lufthansa shares jumped as much as 20 percent after its top shareholder dropped his objections to a $10 billion government bailout.

Employees of Lufthansa attend a protest against planned job cuts with pilots union Cockpit at the Lufthansa Aviation Center in Frankfurt, Germany, June 25, 2020.
Employees of Lufthansa attend a protest against planned job cuts with pilots union Cockpit at the Lufthansa Aviation Center in Frankfurt, Germany, June 25, 2020. (Reuters)

The EU's top competition authority has conditionally approved the massive bailout of Lufthansa by the German government, saving one of the world's biggest airlines from bankruptcy.

The overall rescue comes to nine billion euros ($10 billion) with Lufthansa also receiving three billion euros in public loan guarantees.

"This substantial amount of aid will help Lufthansa weather the current coronavirus crisis, which has hit the airline sector particularly hard," EU competition commissioner Margrethe Vestager said on Thursday.

Tough conditions

The European Commission said Lufthansa would have to make room for rivals at the Frankfurt and Munich airports to ensure fair competition.

It also put limits on any acquisitions of Lufthansa rivals and banned dividends until the state aid is repaid.

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Nevertheless, rival carrier Ryanair immediately announced it would challenge Lufthansa's state aid in an EU court.

Low-cost archrival Ryanair swiftly criticised the EU, saying it would challenge the state aid decision in the bloc's general court.

"Lufthansa is addicted to state aid," Ryanair Chief Executive Michael O'Leary had complained last month.

Top shareholder's endorsement

Germany's plan for Lufthansa is part of an overall rescue that became a reality on Wednesday after a billionaire shareholder reversed course and backed the plan.

Heinz Hermann Thiele, who owns 15.5 percent of Lufthansa's stock, had repeatedly voiced scepticism about the deal, to the dismay of Lufthansa management, employees and unions.

Dozens of Lufthansa employees rallied at Frankfurt airport early on Thursday, many wearing the carrier's high-visibility yellow vests and face masks to curb the spread of the virus. 

"Lift us up where we belong, vote yes!" read one sign carried by a demonstrator, while another said, "We are Lufthansa, we are family."

Jobs at risk

In the massive rescue, the German government is taking a 20 percent stake in the company, though thousands of jobs across the company will be lost.

Even with the government aid, Lufthansa has warned it may have to slash thousands of jobs as travel demand is expected to stay below pre-pandemic levels for years.

But in more good news for the beleaguered group, it struck a deal with German flight attendants' union UFO late Wednesday to cut 500 million euros in costs by 2023 while avoiding cabin crew layoffs.

READ MORE: Germany announces temporary part-nationalisation for Lufthansa

The savings will be achieved through measures including pay freezes, reduced flight hours, early retirement and unpaid leave, both sides said.

Up to 22,000 jobs could be at risk at the airline.

Lufthansa also owns Austrian, Swiss and Brussels Airlines, making it a linchpin of European travel.

Talks continue with the Belgian government over Brussels Airlines, which plans to shed 1,000 jobs.

READ MORE: Travel slump expected to cause massive job losses at UK airports

Source: TRTWorld and agencies