Lufthansa's Largest Shareholder To Meet With Executives Over Bailout

Simple Flying

By Chris Loh

Published Jun 22, 2020

SCHOENEFELD, GERMANY - APRIL 28: Passenger planes of German airliner Lufthansa stand parked and not in use at Willy Brandt Berlin Brandenburg International Airport during the coronavirus crisis on April 28, 2020 in Schoenefeld, Germany. Airlines across the world are facing dire financial circumstances as global restrictions due to the pandemic continue to grind national and international travel to a near-standstill. (Photo by Sean Gallup/Getty Images)

Lufthansa's biggest shareholder, billionaire Heinz Hermann Thiele, is set to meet Germany's economics minister on Monday to discuss a government bailout to the tune of roughly €9 billion (US$10.07 billion). The Monday meeting will include Thiele, Lufthansa Chief Executive Officer Carsten Spohr, and the two German ministers who brokered the deal: Finance Minister Olaf Scholz and Economy Minister Peter Altmaier.

Shareholders must approve bailout terms

The German Government has laid out its offer and the 'strings' attached to the deal, which include a 20% direct stake in the company and two seats on the airline's supervisory board. Thiele, who has a 15.5% stake in the company, is not in support of the Government's offer and the conditions attached.

However, the bailout requires the support of more than two-thirds of shareholders. This means that Thiele's support carries a significant amount of weight and may shape the future of Lufthansa.

Teruel, Aircraft Graveyard, Photos — Lufthansa had already sent many Airbus aircraft to Teruel. Photo: Getty Images

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A counter-offer

With Thiele unsupportive of the Government's offer, the billionaire has instead proposed indirect state participation through the state-owned German development bank, KfW.

This would certainly limit the amount of future government involvement when it comes to Lufthansa's decisions in a post-pandemic world.

According to Reuters, Spohr wrote a letter to airline employees saying that intense talks are underway with the Government and large shareholders which have "the clear goal of finding a satisfactory solution for our company and all participants before Thursday," - this is when an extraordinary shareholder meeting will be held.

Lufthansa's leadership has warned that if shareholders do not come to an agreement to accept a bailout, insolvency will follow. According to Bloomberg, unions, numerous investors, and proxy advisory firms all recommend that shareholders back the deal.

Aviation tax — The Airbus A350 has been utilized throughout the pandemic for Lufthansa's limited operations. Photo: Lufthansa

About Heinz Hermann Thiele

According to Forbes, 79-year-old Heinz Hermann Thiele and his family's wealth ranks 91st on the list of wealthiest people in the world in 2020. As of the time of writing this article, Thiele's "real-time net worth" is valued at $14.6 billion.

Thiele's company, Knorr-Bremse AG, is the world's leading manufacturer of braking systems for rail and commercial vehicles.

Forbes goes on to note that Thiele came from modest means but worked his way through law school to join the firm's legal department in the late 1960s. 20 years later, in the mid-1980s, he took control of the company. Bloomberg notes that at one point in his life Thiele was a former army tank commander.

Do you think the Government will be amenable to the counter-offer of funding through the state-owned development bank without direct participation? Or will it insist on having direct ownership? And what do you think is better for the airline? Let us know your thoughts in the comments.