After a tense week full of uncertainties, Lufthansa Group finally concluded the EUR 9 billion stabilization package at the June 25 shareholder meeting. The airline gained the support of critical major shareholder Heinz Hermann Thiele on the night before the digital meeting as well as reaching an agreement with one of the unions about cost savings. Applying for insolvency, a scenario that was on the table earlier in the week has been prevented.
Of the 39 percent of stock capital present at the digital extraordinary general meeting, 98 percent voted in favor of the package.
As reported on Airinsight, on May 25 Lufthansa concluded an agreement with Germany’s Economic Stabilization Fund (WSF) about a EUR 5.7 billion silent participation, of which 4.7 billion would be in equity. WSF will have a 20 percent share within Lufthansa through the purchasing of EUR 300 million in shares at EUR 2.56 each. KfW Bankengruppe and other investors will provide EUR 3 billion in loans.
The agreement was conditional to terms of the European Commission that including Lufthansa giving up slots at Frankfurt and Munich. After initial opposition, the Supervisory Board approved a compromise on June 1 that sees the airline give up 24 slots at both airports.
Bring on Thiele
That’s when things started to become complicated for Lufthansa. It hadn’t reckoned with one of its most vocal and critical shareholders, Heinz Hermann Thiele. The wealthy 79-year old businessman, who earned himself a fortune with Knorr-Bremse brakes factory, has silently upped his share capital from 10 to 15.52 percent, becoming the single biggest shareholder of Lufthansa.
In an interview with Frankfurter Algemeine Zeitung on June 16, he criticized the stabilization package, specifically the effect the 20 percent participation of the federal government would have on Lufthansa. Thiele was worried that state participation would hinder a much-needed restructuring of Lufthansa and reduction of some 22.000 out of 138.000 jobs, especially when unions would pressure politicians to use their influence on the airline group. Thiele also opposed the EUR 2.56 share price WSF will pay for its 20 percent bailout and demanded negotiations about the package would start again.
With only 38 percent of the shareholders to have initially registered for the General Meeting, a two-third majority would be needed to approve the stabilization package. With Thiele opposing the package, Lufthansa warned that without adequate support its implementation was at risk.
The board even had a serious look at a previous scenario: placing Lufthansa in insolvency and forego any state aid.
Crisis meeting in Berlin
In a crisis meeting in Berlin on June 22 that was attended by CEO Spohr and the secretary of Finance and Economic Affairs, Thiele discussed his view and conditions. No details emerged immediately afterwards, but on the evening of the extraordinary general meeting, Thiele again used the Frankfurter newspaper to clarify his position: he would support the stabilization package after all. “It is in the interest of all Lufthansa staff that the management will swiftly negotiate with unions about the needed restructuring”, he told FAZ. He admitted that there were still opposing views on the situation, but Thiele said he was unwilling to push Lufthansa into insolvency.
More work needs to be done as far as the unions are concerned. Cockpit crew union Vereinigung Cockpit, which welcomed Thiele’s position on Wednesday night, earlier on the day warned that negotiations with Lufthansa still have been without a final result. In April, Cockpit had agreed that pilots would forego on EUR 350 million in payments to save Lufthansa Group a combined EUR 850 million in salaries until June 2022 without making any redundancies. So far, Lufthansa has not confirmed this agreement.
Early today, cabin crew union Ufo announced a four-year agreement with Lufthansa that includes a 13 percent reduction in salaries as well as of working hours. It secures jobs during the crisis, although voluntary leave and early retirement are not excluded. The agreement saves Lufthansa some EUR 500 million. Yet, members have to approve the agreement and Ufo has warned Lufthansa not to make a cold restructuring. Ufo and Lufthansa have fought bitter battles in recent years, costing the airline millions as crew went on strike.
Another cabin crew union, Vereinte Dienstleistungsgewerkschaft ver.di, also welcomed Thiele’s revised position but remains vigilant. Negotiations were to continue.
With matters already complicated, Carsten Spohr has more work to do as the position of CFO has become vacant and will be taken up by Spohr until further notice. Last April, Ulrik Svensson resigned over health issues and his temporary successor Thorsten Dirks (Financial and IT) announced on June 26 that he will leave the airline.