Lufthansa investors back $10 b German government rescue

Monday, 29 June 2020 00:00 - - {{hitsCtrl.values.hits}}

FRANKFURT, REUTERS: Lufthansa shareholders last week backed a EUR 9 billion ($10 billion) government bailout, securing the future of Germany’s flagship airline after it was brought to the brink of collapse by the COVID-19 pandemic.

The plan, backed by 98% of the shareholder capital that cast a vote at the online meeting, will see Berlin take a 20% stake in Lufthansa and two board seats.

Shares in the company, which employs around 138,000 people, closed 7.1% higher, having risen strongly earlier after top shareholder Heinz Hermann Thiele dropped objections to the deal.

Also on Thursday, European Union regulators approved Lufthansa’s EUR 6 billion recapitalisation, part of the bailout deal, subject to a ban on dividends, share buybacks and some acquisitions until state support is repaid.

The approvals will come as a relief to Chancellor Angela Merkel, who could ill afford another high-profile business collapse following the failure of payments firm Wirecard.

Finance Minister Olaf Scholz welcomed the approval.

“This is very, very good news. Good for the company, for the workers at Lufthansa and for Germany,” he said.

The state’s involvement was for a limited time and when the carrier was fit again, it would sell the stake, hopefully at a profit, he said.

Economy Minister Peter Altmaier said it was clear that with the state holding a minority stake, Lufthansa would remain an independent company but the deal made it possible to prevent a hostile takeover.

But tough decisions lie ahead, with Lufthansa working on a restructuring plan in which up to 22,000 jobs could be at risk – although CEO Carsten Spohr told Bild newspaper that hours and wages could be reduced by a fifth instead of axing a fifth of jobs.

Lufthansa has been brought to its knees by COVID-19 and what promises to be a protracted travel slump, and like many rivals, sought state help to stay afloat.