Relief for Lufthansa after top shareholder backs rescue deal

FRANKFURT AM MAIN, Germany – Lufthansa‘s top shareholder on Wednesday, June 24, said he would back a 9-billion-euro government rescue package, removing the threat of a last-minute veto that could have plunged the German airline into bankruptcy.

“I will vote for the agreement,” German billionaire Heinz Hermann Thiele told the Frankfurter Allgemeine Zeitung newspaper on the eve of an extraordinary general meeting where investors will decide on the fate of the coronavirus-hit giant.

Chief executive Carsten Spohr has warned that “the future of the company” is at stake after the pandemic throttled Lufthansa’s usual flood of passengers to a trickle for several months this year.

Spohr will address the online meeting set to begin at 1000 GMT, urging investors to back the plan he hammered out over weeks of talks with ministers and the European Commission.

The 9-billion-euro ($10-billion) plan includes the state claiming a 20% stake.

Thiele, who made his fortune in the rail and auto industries and owns 15.5% of Lufthansa’s stock, had repeatedly voiced skepticism about the deal – to the dismay of Lufthansa management, employees, and unions.

But he told the Frankfurt newspaper insolvency had to be avoided even if he still had doubts about the bailout, in a nod to his concerns about the government climbing on board.

“It is in the interest of all Lufthansa employees that management can quickly begin talks about the necessary restructuring,” Thiele said.

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

But in another boost for the airline, 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.

The savings would be achieved through measures including pay freezes, reduced flight hours, early retirement, and unpaid leave, both sides said in a joint statement.

The deal still needs to be approved by union members.

But UFO spokesman Nicoley Baublies said it “brings urgently needed job security” for Lufthansa’s 22,000 flight attendants as the company weathers an unprecedented crisis.

Lufthansa shares jumped more than 16% at 2300 GMT in after-hours trading as investors digested the latest developments.

Veto power

Lufthansa’s board warned shareholders ahead of the vote on Thursday, June 25, that insolvency was “unavoidable” if the bailout was rejected.

Given that shareholders representing just 38% of the capital have registered to participate, Thiele held the power to singlehandedly torpedo the deal.

The 79-year-old’s motivations for building up his own stake in Lufthansa remain murky.

“I will continue to exert influence on the development of Lufthansa,” he told the FAZ, declining to elaborate.

Bracing for a worst-case scenario, Spohr on Sunday, June 21, said Lufthansa was “prepared” to keep flight operations going even if the vote goes against the board.

Before launching insolvency protection procedures, bosses would “use the time to talk over alternatives with the government,” he added.

The powerful Verdi union welcomed Thiele’s green light.

“This ends an existential threat for almost 140,000 employees globally and their families,” it said in a statement.

“Other shareholders must now follow Thiele’s example and agree to the rescue package.”

Heavy weather

Lufthansa’s climb out of the coronavirus storm promises to be long and arduous as countries emerge from lockdown and air travel slowly resumes.

By September, the group expects its timetable to remain 60% below levels seen before the pandemic.

Further into the future, around 100 of Lufthansa’s present fleet of 763 aircraft will likely be surplus to requirements.

Elsewhere in the group, Vienna granted subsidiary Austrian Airlines aid totaling 450 million euros, while Swiss and Edelweiss received loans totaling 1.2 billion euros from Bern.

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