Lufthansa shareholders approve German rescue package

International

The setting sun illuminates the tail fin of a Lufthansa aircraft at the airport in Frankfurt, Germany, Tuesday, June 23, 2020. The German airline Lufthansa will hold its annual shareholders meeting on Thursday. (AP Photo/Michael Probst)

FRANKFURT, Germany (AP) — Lufthansa shareholders approved a 9 billion-euro ($11 billion) rescue package that will see the government take a 20% stake after management told them the alternative was a bankruptcy filing that would wipe out their holdings.

Shareholders gave the necessary majority of more than two-thirds by voting 98.04% to 1.96% at an extraordinary shareholder meeting held online with just the one agenda item.

With 80% of Lufthansa’s planes grounded, “we have run out of money,” Chairman Karl-Ludwig Kley told participants. “We are living from the reserves we set aside” in good years. “Without support, a bankruptcy looms in the next few days.”

The package will see the government take a 20% stake through its economic stabilization fund and get two seats on the board. Kley said the idea was for the government to dispose of the stake as soon as possible once the airline is stabilized. The government could raise it stake to block any outside takeover. The airline will also embark on an extensive restructuring to lower its costs because it is expected to take years before business returns to normal.

CEO Carsten Spohr said that the airline and its currently 138,000 employees faced a “new normal” of reduced demand that would last for several years.

The company, which also owns other airlines including Austrian Airlines and Swiss, appeared on course to get the deal approved after major shareholder Heinz-Hermann Thiele told the daily Frankfurter Allgemeine Zeitung that he would vote for it. Thiele had previously raised questions over his approval, prompting the company last week to warn that the package could be in danger and to plead with all shareholders to exercise their voting rights.

Hours before the meeting, Lufthansa and the UFO union, which represents cabin crew, said they had agreed on a deal that will allow the company to save more than 500 million euros ($554 million) through the end of 2023. UFO said it includes a four-year protection against layoffs for cabin crew.

Meanwhile, the European Union’s executive Commission approved Germany’s plans to contribute to recapitalizing Lufthansa as part of the rescue package. It noted that Lufthansa has committed to freeing up some slots at its Frankfurt and Munich hubs.

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Moulson reported from Berlin.

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