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Lufthansa Bailout at Risk from Billionaire Shareholder
The fate of German carrier Lufthansa’s federal rescue package will be sealed at the company’s Extraordinary General Meeting June 25, when airline’s shareholders will vote on whether to accept the terms in the deal’s current state. Although the bailout has been approved by the state, shareholders still have to give the green light for it.
However, it appears that the deal hangs on knife-edge as the major shareholder Heinz Hermann Thiele, who has a stake of 15% at the company, might vote against it at the meeting on Thursday.
The German billionaire has said he strongly resents the rescue package agreement on the grounds that the federal government will acquire a 20% stake in the company and will gain two seats on the airline’s board with the agreement.
“The federal government should confine itself to the financial aid packages, which are fundamentally very positive, and should not grow into the role of a return-oriented investor,” Thiele told the Frankfurter Allgemeine Zeitung newspaper last week.
Even if he opposes the direct participation of the federal government, the 79-year-old businessman has not fully closed his door to Berlin, proposing indirect governmental participation through development bankrolled by the state.
The deadline for shareholders to register for the general meeting ended on Saturday. “Only 38% of our shareholders have registered for this general meeting,” said Lufthansa Chief Executive Officer Carsten Spohr in a letter to the employees.
As only a small number of shareholders will be present at the meeting, a two-thirds majority must be achieved for the package to be approved. If at least 50% of the shareholders had registered for the virtual meeting, only a simple majority would have been necessary to approve the financial rescue agreement. Even though the company management asked all shareholders to attend the meeting to exercise their rights in directing the future of the company, it could not manage to reach that threshold. The airline warned that it might apply for bankruptcy protection if the deal is not approved at the meeting.
“In view of the latest public statements by the company’s largest single shareholder, Heinz-Hermann Thiele, the board considers it possible that the stabilization package could fail to achieve the two-thirds majority of votes cast that would be required in this case. This would mean that Deutsche Lufthansa AG would possibly have to apply for protective shield proceedings under insolvency law a few days after the Annual General Meeting if no other solution is found immediately,” the airline said in a statement released on Wednesday.
Ready for All Scenarios
The German flag carrier and its subsidiaries — Swiss International Airlines, Brussels Airlines, Austrian Airlines and Eurowings — have resumed more rigorous flight schedules after two and a half months that saw schedules greatly reduced or slashed completely.
As European countries have lifted the travel restrictions for European residents, airlines have gradually boosted their flight schedules in a bid to raise cash. The German tycoon’s threats to block the bailout will not stop the airline’s flights, as the airline’s chief executive announced. The airline also plans to continue negotiations with Berlin if the rescue package is not approved at the meeting.
“In the event that the General Meeting does not give approval for the federal stabilization measures, we have made extensive preparations, among other things, to prevent grounding,” Spohr added in his letter.
The novel coronavirus pandemic brought Lufthansa operations to a near standstill. Lufthansa Group logged 2.1 billion euros ($2.35 billion) net loss in the first quarter of the fiscal year and its revenue decreased by 18% — from 7.84 billion euros to 6.44 billion euros — compared to the same period last year.
COVID-19 hit the German flag carrier and its subsidiaries hard, forcing the aviation group to ground almost all aircraft in its fleet. Before the rescue package agreement, Spohr said that Lufthansa was losing 1 million euros per hour. The company, the second-largest aviation group in Europe, employs around 138,000 people.
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