LONDON – German carrier Lufthansa (LH) has warned that the €9bn bailout package agreed with the government may be at risk due to internal shareholder conflicts.

One of LH’s largest shareholders, Heinz Hermann Thiele, who owns 15% of the airline, told German press that he wants different solutions to the survival of the carrier.

Having such a stake could enable him to block the bailout on a minority basis.

The German carrier said this week that “the board considers it possible that the stabilization package could fail to achieve the two-thirds majority of votes cast that would be required in this case.”

Photo: Clement Alloing

Voting to aprove the bailout

The extraordinary meeting will take place on June 25, of which shareholders will place a vote on whether to approve the bailout package or not.

If it is rejected, then it is likely that the airline will have to begin the process of insolvency.

This comes at a desperate time for LH who have been burning around one million Euros per hour on average due to the COVID-19 pandemic resulting in the grounding of aircraft, staff, and more.

Lufthansa also said that there is a surplus of around 22,000 workers as a result of the pandemic and that job cuts will have to be made down the line.

The bailout package states that the German government will take a 20% stake in the airline as well as some seats at the table for decision-making.

PHOTO: Lufthansa Group.

An appeal to exercise voting rights

This is also a concern for shareholders especially as stocks would be diluted because of such state intervention.

Thiele in particular has expressed concern stating that the fact that there is “no other consensus-based solutions” available to the airline is an “apodictic statement,” showing great disturbance.

For the bailout package to be approved, a two-thirds majority is needed.

Lufthansa via statements have not publicly advertised for shareholders to vote yes but instead encouraged them to participate.

“The management board urgently appeals to all private and institutional shareholders to exercise their voting rights and to participate in the decision about the future of the company.”

Teetering on the Brink?

As you can expect, this is significant news. If the likes of Thiele manage to get this bailout rejected, then we could see a whole different atmosphere within the German aviation industry.

Whilst it may go into insolvency as a result of such rejections, not all hope is lost. Restructuring may be another option.

September last year saw German leisure carrier Condor go into protection measures to allow such changes to be made within the carrier.

This in theory could be another option for Germany’s flag carrier, but either way, restructuring has to be on the table for the carrier to survive this pandemic.

Wikimedia Commons: Kiefer.

Lufthansa set to lose its value

At this time, those in the shareholder area of LH have to decide whether it is worth taking on the state aid to save the carrier but dilute their shares or it is wiser to put the airline into protective measures, which will reduce its value anyway.

Whatever happens on the vote in under 10 days time, it remains clear that LH is in significant arrears and this needs to be rectified very quickly. Otherwise, we may see a hefty demise.