Dhaka: Lufthansa airline held a six-hour long virtual general meeting today in which shareholders formally voted "yes" to accept a USD 10 billion bailout package from the German government following the coronavirus crisis.
The result may not have come as a surprise following majority shareholder Heinz Hermann Thiele’s last-minute backing for the deal. He owns a 15.5 per cent stake.
“This is truly an extraordinary general meeting,” noted Karl-Ludwig Kley, Chairman, Supervisory Board, Lufthansa in his opening speech.
“It is of historic impact. It’s importance reminds us of (Lufthansa’s) foundation in 1955, and privatisation in 1997. This special importance has been magnified by Heinz Hermann Thiele. He’s fine with this agreement.”
The bailout includes USD 336 million equity participation through the subscription of new shares by the state (corresponding to 20 per cent of the share capital).
Then there is a USD 5.3 billion silent participation with the features of a non-convertible equity instrument, and a USD 1.1 billion silent participation with the features of a convertible debt instrument.
The stabilisation measures are supplemented by a syndicated credit facility of up to USD 3.3 billion with the participation of German state bank KfW and private banks with a term of three years.
The recapitalisation is being financed by the Economic Stabilisation Fund (Wirtschaftsstabilisierungsfond), a special fund established by Germany to help German companies affected by the coronavirus outbreak.
As during the first-quarter earnings call, on June 3, the airline emphasised that the deal really was a last resort.
But with the deal now finalised, Lufthansa will now look to cut some 26,000 jobs across its different airlines and divisions, and it already has a cost-saving programme in place.
“We have made most progress with the flight attendants union (UFO), and we will reduce personnel unit costs by 17 per cent… we are on course to conclude a similar agreement with the pilots union,” said Carsten Spohr, CEO, Lufthansa.
However, talks with the verdi trade union were “more disappointing” and he said the airline urgently needed to progress to avoid making excess staff redundant through job cuts and involuntary layoffs. Nevertheless, Lufthansa has, finally, managed to buy more time.