Lufthansa shareholders have voted to accept a €9 billion ($10.1 billion) bailout from the German government. The airline today held an extraordinary general meeting online to decide on the deal. It came with conditions that the German flag carrier lost some slots at key airports in addition to giving a silent participation stake to the German state.
As more than 80% of Lufthansa’s fleet is currently grounded, it needs the bailout in order to avoid insolvency. This is despite the airline having record profits between 2017-2019. Speaking before the vote, CEO Carsten Spohr said,
“A swift recovery is nowhere to be seen… Our own funds will not be able to cover our need for liquidity… Legal insolvancy is looming if we do not agree to this stabilization package.”
Just over 36% of the airline’s shareholders voted in the extraordinary general meeting. As such, a two-thirds majority was required for the deal to pass. However, the vote was passed by a landslide with just over 98% voting in favor of the deal. As a result of the approval, Lufthansa will not need to seek bankruptcy protection.
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Worry over the deal
Over the past few weeks, Lufthansa had been fairly worried about whether the deal would pass shareholders. A couple of weeks ago, the airline’s biggest shareholder, Heinz Hermann Thiele cast doubt over whether he would vote to approve the airline’s bailout.
As a result of Thiele’s comments, Lufthansa rallied shareholders to register to vote. Had 50% of shareholders attended, a simple majority would have passed the deal. However, as just over 39% of shareholders registered to vote, a two-thirds majority was required.
Earlier this week, Thiele, who owns over 15% of the airline, eased some worries of insolvency by saying that he would support the deal in the interest of the airline’s employees.
Why did Lufthansa need the bailout?
Lufthansa, like many other airlines around the world, has taken a huge financial hit as a result of the current crisis. Indeed, a crisis of such magnitude has never been experienced by the aviation industry in its entire history.
In early May, Lufthansa stated that it was losing around €1 million ($1.1 million) per hour. Clearly, this is not sustainable in the long term. As a result, Lufthansa has found itself in a sticky situation. Lufthansa had previously told that it would need to instigate bankruptcy protection proceedings if the deal was not passed.
Lufthansa is now slowly on the road to recovery following the darkest days of the crisis. However, the recovery is likely to be much slower than the fall. The airline is now on its way to fully restarting. However, time and time again, Lufthansa has consistently told that it expects a full recovery to last until 2023. As such, the airline yesterday signed a deal with the UFO cabin crew union to protect cabin crew jobs until 2023.
What do you make of the Lufthansa bailout vote? Were you for or against the bailout? Let us know your thoughts in the comments!