Lufthansa Prepares For Critical Make Or Break Bailout Vote

Lufthansa is preparing for what could be one of the most important days of its existence. Tomorrow, shareholders are due to vote on a bailout deal worth €9 billion ($10.2 billion). However, last week the airline was worried that the agreement would not make it past shareholders, given low attendance at its annual general meeting.

Lufthansa, Bailout, Shareholder Vote
Lufthansa is preparing for a historic extraordinary general meeting. Photo: Alex Tino Friedel

The current pandemic has walloped Germany’s flag carrier. Since late March, the airline has been running a vastly reduced service as a result of travel bans and a lack of demand. This set the airline back by 65 years in the space of 65 days. Now, the airline is looking to turn itself around, but it can’t manage this on its own.

Bailout vote coming

Tomorrow will be a critical day for Lufthansa. Its shareholders are set to vote on the airline’s bailout. However, the runup to the vote has been anything but simple. The meeting’s attendance will decide how the vote is counted.

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If fewer than 50% of shareholders attend, a two-thirds majority will be required for the motion to pass. However, if over 50% participate, it becomes a simple majority. Lufthansa was already worried as only 33% of shareholders registered to attend this year’s annual general meeting. As of Sunday, only 38% of the airline’s shareholders had registered to participate in the conference.

Lufthansa, Bailout, Shareholder Vote
The airline will likely need a 2/3 majority for the bailout to pass. Photo: Alex Tino Friedel

However, another hurdle was encountered in the form of the airline’s largest private shareholder. Heinz Hermann Thiele has purchased additional shares in Lufthansa since the bailout deal was proposed. As of June 17th, he was accountable for 15.52% of shares in the Lufthansa Group.

Thiele isn’t necessarily on board with the bailout deal, disagreeing with some of the conditions attached. He previously hadn’t ruled out voting for the agreement but is widely believed to be preparing to vote against the agreement. Earlier this week, he met with the German finance minister, Olaf Scholz, among others, to discuss the deal.

What if the deal doesn’t pass?

Lufthansa is counting on the €9 billion bailout for its future. In a previous statement sent to Simple Flying, the airline group confirmed that it would be forced to look at bankruptcy protection if other plans couldn’t be sorted out immediately.

The extraordinary general meeting will take place at noon tomorrow. Photo: Lufthansa

However, according to a new report from Reuters, it seems as though Lufthansa has a trick up its sleeves. Earlier today, the publication cited an unnamed airline source as saying plan B will see a different approach adopted. The German Government would still get a 20% stake in the airline.

However, this would take place in two steps. As a result, the need for shareholder approval would be avoided. Reuters said,

“The remaining stake would come from a regular capital increase in which all Lufthansa shareholders could participate, said the person, who is familiar with the plans.”

Do you think the Lufthansa bailout deal will get past shareholders tomorrow? Let us know your thoughts in the comments.