“Lufthansa can continue to fly with German state aid. Shareholders of the MDax Group on Thursday approved a 20 percent shareholding of the Federal Republic with a majority of 98.04 percent. The associated aid package of EUR 9 billion can now be implemented. Already in the morning, the European Union’s competition watchdogs had finally approved the German bailout measures.
In the struggle for the state rescue package, the Lufthansa leadership had once again increased the pressure on shareholders. “We no longer have any money,” said Chairman of the Supervisory Board Karl-Ludwig Kley at the Group’s extraordinary general meeting. Without the €9 billion support package, Kley said the airline would have had to file for bankruptcy “in the next few days.” After the bailout plan was approved, Kley said, “We can do it!”
At the extraordinary general meeting broadcast exclusively on the Internet, major shareholder Heinz Hermann Thiele refrained from blocking the rescue package. Due to the weak shareholding of the other voting rights holders with a presence of 39.3 percent, he would have had the opportunity to block his shareholding of at least 15.5 percent. In the run-up to the event, the self-made billionaire had been highly critical of what he considered to be too much state influence.
The Federal Government has been relieved by the decision. Now the group has a perspective to “stand and survive the most difficult challenge in its history at the moment,” said Federal Economics Minister Peter Altmaier (CDU) in Berlin on Thursday. Lufthansa has a chance to emerge stronger from this. The participation will not last “any day longer” than necessary. The Confederation does not interfere in the operational business.
Finance Minister Olaf Scholz (SPD) said this was good news for the company itself, its employees and Germany as a business location. “With the financial aid, the Federal Government is stabilising a large German company that was in good health and has been in serious turmoil due to the effects of the Corona pandemic.”
In the morning, the EU Commission had approved the rescue plan. As a condition, the competition watchdogs enforced that Lufthansa must hand over 24 take-off and landing rights to competitors in Munich and Frankfurt respectively. Commission Vice-President Margrethe Vestager said: “This will give competing airlines the opportunity to enter these markets, ensuring fair prices and greater choice for European consumers.” However, competitor Ryanair announced a lawsuit against the aid.
Lufthansa’s board of directors defended the package as having no alternative
Before the vote, the Lufthansa Executive Board defended the package of participation, silent deposits and credit negotiated with the Federal Government as having no alternative. More was unenforceable. The concept would impose significant financial and structural burdens on Lufthansa in the coming years, said Chairman kley. “It’s a very lucrative business for the state,” he said. Nevertheless, the agreement gives the company space and time to overcome the crisis. In the end, shareholders also benefited from this. Lufthansa CEO Carsten Spohr expressed confidence that he would be able to service the deposits and loans on time. Nor is it obliged to call up credit and deposits in full.
In the event of failure, Lufthansa had announced that it would quickly apply for a so-called protective shield procedure. This mildest form of insolvency under German law is already applied to the holiday airline Condor and gives management a largely free hand to terminate existing contracts with its own staff. This is no longer necessary. With 138,000 employees worldwide, the Group had estimated the accounting overhang in the Corona crisis at 22,000 full-time positions, half of them in Germany.
The company is in advanced negotiations with the unions to significantly reduce costs. The controversial cabin trade union Ufo was the first to agree to a crisis package that will help Lufthansa save more than half a billion euros by the end of 2023, even without redundancies. In addition to shortened working hours, the renunciation of already agreed wage increases and occupational pensions, There are a variety of voluntary measures to reduce labour costs. In the morning, hundreds of UFO flight attendants demonstrated in front of Lufthansa headquarters for the acceptance of the state rescue.
After the three most successful financial years to date, Lufthansa crashed in March due to the Corona pandemic. The cash reserves of Germany’s largest airline were last reduced by 800 million euros per month, threatening insolvency. In the first quarter, the Corona crisis already caused the company a loss of 2.1 billion euros. Lufthansa says it has already repaid €1 billion to customers for cancelled flights. Another billion is still outstanding.
Lufthansa CEO Spohr expects demand in air transport to recover slowly and to remain below the pre-corona level for years. The result is a significant shrinkage of the fleet. According to Michael Niggemann, Chief Human Resources Officer, however, the Group expects to reach pre-crisis levels as early as 2022.
The rescue package stipulates that the State Economic Stabilisation Fund (WSF) will subscribe for around 300 million euros of shares as part of a capital increase in order to build up a 20 percent stake in the airline’s share capital. He pays only the face value of 2.56 euros, about a quarter of the current share price. In the event of a hostile takeover, the state could activate additional shares in order to achieve a blocking minority. In addition, silent partnership contributions of 5.7 billion and a KfW loan of 3 billion euros are planned.