Lufthansa is struggling with the federal government for an aid package worth nine billion euros. Now it is clear: The state wants to take over 25 percent plus one share.
Until now, Lufthansa had not commented in detail on the talks with the German government about state aid. On Thursday afternoon (May 7th) the company broke its silence in a mandatory notice. One negotiates “with the federal economic stabilization fund a stabilization package in the amount of nine billion euros for financing” of the group, it says in the statement.
There is still no agreement. “The negotiations and the process of forming political will continue,” said Lufthansa. It is about a silent participation and a secured loan. The conditions of the two measures have not yet been determined.
Moving into the supervisory board
It is clear that the German state wants to participate in Lufthansa’s share capital. The aim is to “create a shareholding of up to 25 percent plus one share,” it says. This gives the government in Berlin a blocking minority at Lufthansa. This could theoretically block certain resolutions of the general meeting for which approval of at least 75 percent of the capital is required.
So that the state gets the 25 percent, various variants are discussed. Among other things, a capital increase “to the nominal amount of the share, if necessary after a capital cut” is an issue. That means the old shareholders would lose influence.
No dividend payments
The economic stabilization fund also aims to be represented on the supervisory board. Lufthansa does not provide any details on this. There are also provisions under German and European law, including the waiver of future dividend payments.
“While the state should secure extensive monitoring and supervisory rights with the silent participation, the proportion of existing shareholders is watered down by a capital reduction followed by a capital increase,” comments Roman Podhorsky, specialist lawyer for capital market law. “However, future dividends are likely to continue to be generously distributed to existing shareholders, as the German state will have to forego future dividend payments due to EU regulations.”
800 million less a month
Lufthansa is currently losing around EUR 800 million in cash reserves per month in the Corona crisis, despite short-time working. In addition, she hardly takes any new money because she sells almost no tickets. The company also faces reimbursements of 1.8 billion euros for flights canceled until the end of May. Furthermore, securing fuel that is not needed at all should result in a burden of around one billion euros in 2020.
Lufthansa therefore plans to reduce its fleet by around 100 aircraft. This could result in the loss of up to 10,000 jobs. At the group’s general meeting on Tuesday, CEO Carsten Spohr said that it was assumed that the aviation market “would not have found a new balance until 2023 at the earliest.” However, there is a risk that even then you will be below the demand of 2019.
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