Lufthansa skyrockets after major shareholder backs bailout

FRANKFURT (Reuters) – Lufthansa (LHAG.DE) Shares rose as much as 20% on Thursday after its main shareholder rejected its objections to a 9 billion euro ($ 10 billion) government bailout for the German airline that was on the brink of collapse due to the COVID pandemic- 19.

“I am going to vote on the proposal,” billionaire investor Heinz Hermann Thiele, who recently increased his stake in Lufthansa to 15.5%, told the Frankfurter Allgemeine newspaper on Wednesday.

Its endorsement amounts to an 11-hour postponement for Germany’s flagship airline after fears it could veto the proposed bailout, prompting the government to take a 20% stake and board seats, diluting existing shares. .

Shareholders are due to vote on the plan later Thursday at an online meeting due to the pandemic.

Thiele’s endorsement will be a relief to Chancellor Angela Merkel, who could not afford yet another high-profile trade collapse following the failure of payment firm Wirecard.

Rooted in nearly a century, Lufthansa employs some 138,000 people and owns brands such as Eurowings and Austrian Airlines.

COVID-19 brought him to his knees and what promises to be a prolonged crash from travel, and like many rivals around the world, he sought state aid to stay afloat. Even after Thursday’s gains, its shares fell nearly 40% this year.

Also on Thursday, European Union regulators approved the Lufthansa bailout agreement, subject to a ban on dividends, share buybacks and some acquisitions until state support is repaid.

At 1015 GMT, Lufthansa shares rose about 14% to € 10.18, leading Germany’s mid-cap MDAX index .MDAXI.

Lufthansa planes are seen parked on the runway of the Frankfurt airport, Germany, on June 25, 2020. REUTERS / Kai Pfaffenbach


Concerned about a government stake that would make it harder for Lufthansa to make tough decisions about restructuring and job cuts, Thiele had proposed an indirect government stake in the airline through Germany’s development bank KfW.

That raised fears that the bailout would fail and Lufthansa would have to seek protection from creditors within days.

Chief Executive Carsten Spohr said the German government did not plan to become involved in the airline’s operations.

“Everyone knows that we are in global competition. We need the tools to compete against American or Chinese airlines, “Spohr told the Bild newspaper.

Thiele said talks with the government on Monday had not removed his doubts, but that he could not have voted in favor of insolvency. He said he would continue to try to influence the development of the company in the future, although he declined to say how.

Thiele said Lufthansa employees are interested in management quickly negotiating the restructuring with the unions.

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Up to 22,000 jobs could be at risk on the airline.

Spohr said he wanted to prevent job loss by reducing work time and wages for all employees, suggesting that hours and wages could be cut by a fifth rather than cutting a fifth of jobs.

Lufthansa reached an agreement overnight with the UFO union representing the German cabin crew that is about to reap more than 500 million euros in savings, including steps to stop wage increases, cut hours of work and a limit on pension contributions.

More talks are scheduled for Friday with the Verdi services union.

Reports by Thomas Seythal, Edward Taylor and Ilona Wissenbach; Written by Emma Thomasson; Michelle Martin and Mark Potter edition

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