Frankfurt, The German government will take a 20-per-cent stake in Germany’s top air carrier, Lufthansa, clearing the way for 9 billion euros (10 billion dollars) in state aid for the crisis-hit airline.
Shareholders approved the move on Thursday following a day of deliberations in which company executives asked for assistance to stay in business, after the coronavirus pandemic grounded the company, said dpa.
The move was approved with the backing of 98.04 per cent of the shareholders.
Lufthansa officials had warned that the company would face insolvency if the plans fell through.
“We have no more money,” said Karl-Ludwig Kley, head of the supervisory board, adding that insolvency proceedings would have come within days if shareholders did not back the deal.
Insolvency or protective shield proceedings are “not a threat, rather a real danger,” said Michael Niggemann, Lufthansa’s chief officer for corporate human resources and legal affairs, earlier on Thursday.
The 9-billion-euro bailout negotiated between the Berlin government, Lufthansa and European Commission depended on whether shareholders voted in favour of the German state taking a 20-per-cent stake in the ailing company.
Valued at around 300 million euros, that stake is only a small part of the total package – but it has irked investors, who will see their own shares diluted as a result of the state intervention. Meanwhile, the government is set to pay 2.56 euros per share, around a quarter of the current stock market price.
Lufthansa has spiralled into crisis as a result of the catastrophic impact of the coronavirus pandemic on air travel – and the company still expects to have to pay out another billion euros or so to customers whose flights have been cancelled, according to Niggemann.
Lufthansa chief executive Carsten Spohr said this amount could be paid off within six weeks, provided the company gets the state aid that it is hoping for.
“We at Lufthansa understand our obligation to repay this 9 billion to the taxpayers as quickly as possible,” he said.
Niggemann had warned that no other financing options were “in sight,” which would have meant insolvency was the only other options had the deal not won approval. He warned investors that they risked losing their shares’ value “almost completely” if they blocked the deal.
The outcome of the online meeting largely came down to one man, Lufthansa’s biggest shareholder, Heinz Hermann Thiele.
He had been critical of the deal, but in an interview with the Frankfurter Allgemeine Zeitung on Wednesday he said he had decided to back it.
Due to a weak shareholder turnout for the online meeting, a two-thirds majority was needed in the vote, which would have been a tall order without Thiele’s backing. He holds a 15.5-per-cent stake.
The European Commission, which acts as the EU’s antitrust watchdog, gave its official approval to the multibillion-dollar bailout deal on Thursday.
The EU executive has, however, attached strings to the deal to limit the distortion of competition. Lufthansa will have to give up some of its take-off and landing slots at busy Frankfurt and Munich airports, where it is a dominant player.
“This gives competing carriers the chance to enter those markets,” EU Competition Commissioner Margrethe Vestager said in a press release.
But it is not without its critics.
“This is a spectacular case of a rich EU member state ignoring the EU treaties to the benefit of its national industry and the detriment of poorer countries,” Ryanair chief executive Michael O’Leary said in a statement before the decision was announced.
Parallel to these dealings, Lufthansa has been hammering out cost-savings deals with groups representing employees.
Cabin crew union UFO approved one on Thursday that will allow the company to cut 500 million euros in costs. The deal includes reduced hours for workers and an agreement to forgo pay increases.
Source: Bahrain News Agency