Lufthansa can continue to fly with German state aid. The shareholders of the flight company approved a 20 percent capital participation of the Federal Republic.
The associated aid package of over nine billion euros can now be implemented. This also makes things easier for the Lufthansa subsidiary Swiss.
In the struggle for the state bailout package, the top of Lufthansa increased the pressure on the shareholders again at the extraordinary general meeting on Thursday. “We have no more money,” said supervisory board chairman Karl-Ludwig Kley. Without the support package of nine billion euros, the airline Kley should have filed for bankruptcy “in the next few days”. After accepting the rescue plan, Kley said: “We can do it!”
At the extraordinary general meeting broadcast exclusively on the Internet, major shareholder Heinz Hermann Thiele decided not to block the rescue package. Because of the weak participation of the other voting right holders with a presence of 39.3 percent, he would have had the opportunity to block with his share of at least 15.5 percent. In the run-up to the self-made billionaire had been very critical of what he thought was too strong a state influence.
EU Commission also agrees
The EU Commission had already approved the rescue plan in the morning. As a condition, the competition authorities enforce that Lufthansa must hand over 24 take-off and landing rights to competitors in Munich and Frankfurt. Commission Vice-President Margrethe Vestager said: “This gives competing airlines the opportunity to enter these markets, ensuring fair prices and more choice for European consumers.” Competitor Ryanair nevertheless announced a lawsuit against the aid.
Before the vote, the Lufthansa Executive Board defended the package of participation, silent participations and credit negotiated with the German government as an alternative. More was not enforceable. The concept will mean considerable financial and structural burdens for Lufthansa in the coming years, said supervisory board chief Kley. “It is a very lucrative business for the state.”
Still, the agreement gives the company space and time to overcome the crisis, Kley continued. Ultimately, the shareholders also benefited from this. Lufthansa boss Carsten Spohr was confident that he would be able to service the deposits and loans on time. There is also no obligation to call up credit and deposits in full.
Swiss welcomes decision
The decision made at the Annual General Meeting is well received by the Swiss Lufthansa subsidiaries Swiss and Edelweiss. Swiss and Edelweiss welcome the shareholder decision on the necessary capital measures, it said in a short statement. This ensures liquidity.
“Today’s decision by the shareholders gives us planning security in order to continue the resumption of flight operations and to ensure Switzerland’s connection to the world,” said Swiss CEO Thomas Klühr. Now they will plan the next steps with Lufthansa and the respective authorities. The first loans to Swiss would then be paid out.
At the beginning of May, the federal government announced that CHF 1.275 billion would be emergency aid for Swiss and its sister Edelweiss. This money is ready, but has not yet flowed due to the delays in Germany. A bankruptcy of Lufthansa could also have dragged Swiss down.
Bankruptcy averted
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 according to German law is already used by the Condor holiday plane and gives management largely free rein to terminate existing contracts with their own staff. This is no longer necessary. The corporation, with 138,000 employees worldwide and 22,000 full-time positions, estimated the overhang in the corona crisis, half of them in Germany.
The company is in advanced negotiations with the unions for extensive cost reductions. The controversial cabin union Ufo was the first to approve a crisis package that would help Lufthansa save more than half a billion euros by 2023, even without dismissals. In addition to shorter working hours, the waiver of agreed wage increases and company pension payments, there are a number of voluntary measures to reduce wage costs.
After the three most successful fiscal years to date, Lufthansa had a business crash in March due to the corona pandemic. The cash reserves of the largest German airline recently decreased by 800 million euros per month, so that the bankruptcy threatened. In the first quarter, the corona crisis broke the company’s loss of 2.1 billion euros. According to its own statements, Lufthansa has already paid back one billion euros to customers for canceled flights. Another billion is still outstanding.
Lufthansa CEO Spohr expects demand in aviation to recover slowly and to remain below the pre-corona level for years. The consequence is a significant shrinkage of the fleet. According to Michael Niggemann, the head of the HR department, the Group is confident that the profit will reach the pre-crisis level by 2022.
The rescue package stipulates that the State Economic Stabilization Fund (WSF) will subscribe shares for around 300 million euros in the course of a capital increase in order to build up a 20 percent stake in the airline’s share capital. He only pays the nominal value of EUR 2.56, around 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 deposits of 5.7 billion and a KfW loan of 3 billion euros are planned.
Frankfurt/Main (awp/dpa)
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