Lufthansa Shareholders Agree to $10.1 Billion Government Bailout

Deutsche Lufthansa AG shareholders have agreed to support a bailout package from the German government which will assist the airline group to survive in a post-COVID environment. At the ‘Extraordinary General Meeting’ held on Thursday, the €9 billion ($10.1 billion) package which gives the government a 20% stake and two seats on the board was met with approval by 98% of those who voted in the online meeting.

There had been concerns earlier in the week as to whether the bailout offer could secure the two-thirds of votes needed to pass given that less than 40% of eligible shareholders had registered for the meeting. This gave the consortium’s biggest shareholder Heinz Hermann Thiele who owns 15.5% of the company the equivalent of 40% of the votes. 

Government aid has been seen as vital for the aviation industry to weather the COVID-19 crisis and to restart operations. Chairman of the Executive Board of Deutsche Lufthansa AG Carsten Spohr had been reported in the Financial Post earlier declaring that, “we can’t make it through this year on our own.” At the meeting, it was presented to shareholders that the future viability of the group would be dependent on a combination of competitiveness and ability to invest.

Speaking after the meeting’s result Mr. Spohr said, “The decision of our shareholders provides Lufthansa with a perspective for a successful future. On behalf of our 138,000 employees, I would like to thank the German federal government and the governments of our other home countries for their willingness to stabilize us. We at Lufthansa are aware of our responsibility to pay back the up to 9 billion euros to the taxpayers as quickly as possible.”

Operational restructuring and staff reductions will form part of Lufthansa’s strategy to remain a viable entity. Though no specific details were included in Thursday’s press release regarding the extent of job cuts the group did announce that they intend to operate to 90% of the short-haul market and 70% of long-haul routes by September.

Earlier reports had assessed potential job losses at Lufthansa at 20 percent of the workforce. However, prior to the Extraordinary General Meeting (EGM) Reuters reported that Mr. Spohr has floated the idea of negotiating reduced working hours and lower salaries within the Lufthansa airline. He is quoted as saying “One idea is rather than a fifth of employees having to leave, that everyone works a fifth less, for example, and earns a fifth less. For me, that would be a much more socially responsible way than forced layoffs.”

Speculation had also been growing about the future of the other airlines within the Deutsche Lufthansa AG consortium specifically Brussels Airlines and SWISS. However, the press release issued after the EGM stated: “A decision on the approval of the stabilization measures in the other home markets of Lufthansa Group will be made in the near future.”

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John Flett

John has always had a passion for aviation and through a career with Air New Zealand has gained a strong understanding of aviation operations and the strategic nature of the industry.

During his career with the airline, John held multiple leadership roles and was involved in projects such as the introduction of both the 777-200 and -300 type aircraft and the development of the IFE for the 777-300. He was also part of a small team that created and published the internal communications magazines for Air New Zealand’s pilots, cabin crew and ground staff, balancing a mix of corporate and social content.

John is educated to postgraduate level achieving a Masters degree with Distinction in Airline and Airport Management. He has been the course director of an undergraduate commercial pilot training programme at a leading London university and a member of Heathrow Community Trust’s ‘Communities for Tomorrow’ panel.

John is currently living in Canada and is contracted as an external instructor for aviation-related organizations.

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