May 20, 2020
German govt agrees Lufthansa rescue offer: report (Update)
German ministers on Wednesday agreed final details of a rescue deal they will offer coronavirus-stricken airline giant Lufthansa, business daily Handelsblatt reported.
Berlin will take a 20-percent stake in the group, topping it up with a convertible bond worth five percent plus one share—"putting the state in a position to build a blocking minority in case of a hostile takeover", the newspaper said.
If confirmed, the solution would close weeks of wrangling between Chancellor Angela Merkel's CDU conservatives and their centre-left junior partners the SPD.
Pro-business politicians among Merkel's ranks have long rejected excessive state involvement in Lufthansa, saying business decisions should be left up to managers.
But the SPD has held out for a bigger stake that would allow Berlin to influence bosses over potential job cuts or environmental targets.
On top of the state shareholding, Lufthansa is set to receive a three-billion-euro ($3.3 billion) loan from state investment bank KfW to tide it over the collapse in revenues while around 90 percent of its fleet is grounded.
And some of the centre-left's goals will be met with two state-appointed seats on the Lufthansa supervisory board, Handelsblatt reported.
But the people nominated to the posts will "not be politicians or civil servants", but rather businesspeople in a similar model to pan-European aircraft maker Airbus.
Speaking to journalists earlier Wednesday, Merkel said a final decision on the offer to Lufthansa would fall "soon", while a government spokesman told AFP "talks have made a lot of progress, but are not yet complete".
Handelsblatt reported that Lufthansa would have two days to respond when it is finally offered the deal, while shareholders will have to sign off on the package if bosses accept as it would dilute the value of their stakes.
The European Commission would also have to give its green light.
A million euros per hour
Economy Minister Peter Altmaier said earlier in May that Lufthansa was part of Germany's "family silver" and that Berlin aimed to avoid a "fire sale" of valuable firms.
If plans go ahead, it would be the first time the government has held a stake in the group since 1997.
But around 700 of its 760 aircraft are currently parked at airports and more than 80,000 of its 130,000 staff are on part-time work schemes.
In April, the group was carrying fewer than 3,000 passengers daily compared with a pre-pandemic average of around 350,000 a day.
Chief executive Carsten Spohr has said the group—which also includes Brussels and Austrian Airlines, Eurowings and Swiss—is bleeding "about a million euros in liquidity reserves per hour. Day and night. Week by week."
The group's woes did not prevent the SPD attempting to play hardball in talks to try and secure influence.
"The state is not some idiot that will just hand over money and have no say after that," SPD deputy Carsten Schneider told the daily Die Welt earlier this month.
But bosses responded by warning that without state aid they could declare insolvency to benefit from a grace period during which they could try to sort out the group's finances.
Such a step could mean painful job cuts at the group, especially given that Spohr has said there are now 10,000 too many staff given the state of Lufthansa's operations.
© 2020 AFP