Lufthansa announces recapitalisation; attempting to avoid job losses
The Lufthansa Group board this morning called an extraordinary video conference for the general public and the groups shareholders in which it announced a potential 306 million euro recapitalisation of the airline in order to ensure its survival into the future.
During the conference, Lufthansa CEO Carsten Spohr made it clear that the only way forward for the airline was for its shareholders to dilute their shares in the company, warning that if they rejected the recapitalisation plan the airline could face a sudden bankruptcy and the need for liquidation.
A Lufthansa A350-900 wearing the new livery. Photo by Andrew Pries | AeroNewsX
This mornings meeting comes after the announcement on Thursday 18th June 2020 in which the EU approved a EUR9 billion state rescue loan for the airline by the German government which required the majority of shareholders in the business to give up their shares. However, in order for the state rescue package to the airline to come into effect Lufthansa needs the approval of its key shareholders who are due to cast their vote on the rescue plan by Thursday 27th June. CEO Spohr was this morning quoted saying "we ask for nothing less than your consent to rescue Lufthansa", indicating how dire the situation really was if the rescue package was not implemented.
When broken down, the European Commission approved rescue package for Lufthansa includes a EUR6 billion cash injection for the airline, in order to assist it in staying afloat during the ongoing coronavirus crisis. However, it also gives the German Government a 20 percent stake in the Lufthansa Group, with the remaining EUR3 billion being set aside for loan guarantees.
Lufthansa CEO Spohr also took the opportunity during this mornings conference to announce the company would be avoiding job losses as much as possible through a variety of channels including unpaid leave, early retirements and reduced working hours for affected staff. Spohr strongly encouraged unions to accept this offers in order to prevent job losses throughout the Lufthansa Group of operations, which today employs over 100 000 staff worldwide. During the conference, it was also noted that yesterday, on the 24th of June, a deal was brokered with German cabin crew union UFO to save EUR500 million in operating costs extending until 2023, preventing any loss of jobs for the airlines' 22 000 cabin crew members based across Europe. However, it was also noted the airline has not had as much success as of yet in negotiating with the unions representing the Lufthansa Group pilots and engineering staff.
In recent weeks, the Lufthansa Group also announced it was calling of governments in other nations where its subsidiaries such as SWISS, Austrian, Brussels Airlines and Air Dolomiti are located to give financial assistance.. The government bailout, however, has not prevented Lufthansa becoming a smaller company with the message reiterated in today's conference that the airline would be a "smaller and more efficient" carrier in the future with 100 of the group's 763 aircraft to be removed from the fleet in the near term to ensure it could "repay every cent" of the money from the government loan it will use to survive this crisis.
The bailout has been widely endorsed by Lufthansa Group employees who lined the company's head office fences with banners calling on shareholders to approve the deal in order to ensure the airlines future as the national carrier of Germany. But it appears the airline's competition is not equally impressed about the announcement with Ryanair announcing it would be challenging the bailout in a Luxembourg court stating Lufthansa did not need the loan to survive "but to fight off competition in the market."