The financial lifeline follows weeks of talks over the support needed by the carrier to weather the COVID-19 travel turmoil.
Lufthansa has agreed a €9bn (£8bn) rescue deal with the German government, which gives it a 20% share in the ailing airline.
The massive corporate bailout also gives Berlin a veto in the event of a hostile takeover bid for the German flagship carrier, as it seeks to safeguard thousands of jobs.
Lufthansa has been locked in talks with the government for weeks over the aid it needs to survive the travel turmoil caused by the global coronavirus pandemic.
Central to the negotiations was how much control the airline handed over in return for financial support.
The German government has spent decades offloading stakes in companies, but remains a large shareholder in former state monopolies, including Deutsche Post and Deutsche Telekom.
Berlin also still has a 15% holding in Commerzbank, which it took on during the global financial crisis.
Other airlines including Franco-Dutch Air France-KLM and US carriers American Airlines, United Airlines and Delta Air Lines have also sought state aid after COVID-19 hit global travel.
The Berlin government said the airline had been operationally healthy and profitable, but had run into difficulties because of the pandemic.
“The support that we’re preparing here is for a limited period,” Finance Minister Olaf Scholz said of the bailout.
Berlin, which has set up a €100bn (£89.5bn) fund to take stakes in companies struck by the coronavirus crisis, said it plans to sell the Lufthansa stake by the end of 2023.
“When the company is fit again, the state will sell its stake and hopefully… with a small profit that puts us into a position to finance the many, many requirements which we have to meet now, not only at this company,” Mr Scholz added.
Conditions of the deal include the waiver of future dividend payments and limits on management pay, Lufthansa said.
The government will also take two seats on its supervisory board, with one becoming a member of the audit committee.
Under the package, the state’s holding could rise by 5% to protect Lufthansa against a hostile takeover.
“This (bailout deal) will prevent Lufthansa from being sold out,” economy minister Peter Altmaier said, pointing out it would help to save thousands of jobs.
Lufthansa will separately receive a €3bn (£2.7bn) three-year loan from state-backed KfW and private banks.
The government bailout still requires approval by shareholders as well as the European Commission.
Mr Altmaier said: “We liaised with Brussels on all big rescue packages with which we avoided millions of unemployed and prevented a lot of companies from bankruptcy.
“They were all approved at the end… so this gives me hope that we’ll also find a solution in this case.”
Germany is still discussing with Europe’s competition watchdog which airport slots it will have to give up to ensure the bailout does not hamper competition, according to insiders.
(SKYNEWS)
