Lufthansa board member Thorsten Dirks leaves the company
Lufthansa board member Thorsten Dirks resigns. Dirks took the successful completion of the state stabilization measure as an opportunity to withdraw from the company’s Executive Board, said Deutsche Lufthansa AG. No further details of the reasons were given.
Dirks was appointed to the board in May 2017. At the end of 2019, he had given up responsibility for the group airline Eurowings and taken over the newly founded IT, Digital & Innovation department. After the departure of the former CFO Ulrik Svensson in April, significant parts of the finance department were added and Dirk’s area was renamed “Digital and Finance”. For the time being, this board department will be taken over temporarily by the chairman, Carsten Spohr, the company said.
Top management had warned of failure
In the struggle for the state bailout package, the Lufthansa management had previously increased the pressure on the shareholders. “We have no more money,” said Chairman of the Supervisory Board Karl-Ludwig Kley at the extraordinary general meeting of the group. Without the support package of nine billion euros, the airline Kley should have filed for bankruptcy “in the next few days”. After accepting the rescue plan, Kley said: “We can do it!”
The federal government was relieved. Now the airline has a perspective “to face and overcome the currently most difficult challenge in its history,” said Federal Minister of Economics Peter Altmaier (CDU). The participation would exist “not a day longer” than necessary. The federal government does not interfere in the operational business. Finance Minister Olaf Scholz (SPD) said that this is good news for the company itself, its employees and Germany as a business location. “With the financial aid, the federal government is stabilizing a large German company that was in good health and that was experiencing severe turbulence due to the effects of the corona pandemic.”
Lufthansa boss Carsten Spohr thanked the federal government and said: “We Lufthansa employees are aware of our responsibility to repay up to 9 billion to taxpayers as soon as possible.”
At the extraordinary general meeting broadcast exclusively on the Internet, major shareholder Heinz Hermann Thiele decided not to block the rescue package. Due to the weak participation of the voting right holders with a presence of 39.3 percent, he would have had the opportunity to block with his share of at least 15.5 percent. In the run-up, the self-made billionaire had commented critically on what he thought was too strong state influence. The EU Commission also approved the rescue plan. As a condition, the competition authorities enforce that Lufthansa must hand over 24 take-off and landing rights to competitors in Munich and Frankfurt.
In the event of failure, Lufthansa had announced that it would quickly apply for a so-called protective shield procedure. This mildest form of insolvency according to German law is already used by the Condor holiday plane and gives management largely free rein to terminate existing contracts with their own staff. That is not necessary now. The corporation, with 138,000 employees worldwide and 22,000 full-time positions, estimated the overhang in the corona crisis, half of them in Germany.
The company is in advanced negotiations with the unions for extensive cost reductions. The controversial cabin union Ufo was the first to agree to a crisis package that would help Lufthansa save more than half a billion euros by the end of 2023, even without layoffs. In addition to shorter working hours, the waiver of agreed wage increases and company pension payments, there are a number of voluntary measures to reduce wage costs.
Corona crisis has weighed heavily
After the three most successful fiscal years to date, Lufthansa had a business crash in March due to the corona pandemic. The cash reserves of the largest German airline recently decreased by 800 million euros per month, so that the bankruptcy threatened. In the first quarter, the corona crisis broke the company’s loss of 2.1 billion euros. According to its own statements, Lufthansa has already paid back one billion euros to customers for canceled flights. Another billion is still outstanding.
Lufthansa CEO Spohr expects demand in aviation to recover slowly and to remain below the pre-corona level for years. The consequence is a significant shrinkage of the fleet. According to Michael Niggemann, the head of the HR department, the Group is confident that the profit will reach the pre-crisis level by 2022.
The pilot union union cockpit described the planned escape route as a difficult but alternative compromise. The company must now concentrate on the urgent operational challenges, said VC President Markus Wahl. The pilots wanted to make their contribution with a far-reaching savings offer. The Verdi union said that the protection of employees must now become the focus of politics and companies. “State aid now also has to secure jobs and income,” said Deputy Chair Christine Behle.
The rescue package stipulates that the State Economic Stabilization Fund (WSF) will subscribe shares for around 300 million euros in the course of a capital increase in order to build up a 20 percent stake in the airline’s share capital. He only pays EUR 2.56, around a quarter of the current share price. In the event of a hostile takeover, the state could activate additional shares in order to achieve a blocking minority. In addition, silent deposits of 5.7 billion and a KfW loan of 3 billion euros are planned.
After rescue: Bernstein leaves Lufthansa on ‘market perform’
The US analyst Bernstein Research left the Lufthansa share “Market-Perform” with a target price of EUR 10 after the shareholders’ approval of the state rescue package. The news of the approval is good because it removes uncertainty and paves the way for a recovery, analyst Daniel Roeska wrote in a first reaction on Thursday. But the airline still has a lot ahead of it given its debt burden.
Billions from the rescue package flow as quickly as possible
– “The money from the Kfw loan should flow as quickly as possible,” said a company spokesman on Friday. Elsewhere it was said that the technical implementation should take a few more days. It was also a large bank consortium, said a person familiar with the matter. The “Spiegel” had reported that the government made part of the total of nine billion euros immediately available. Accordingly, the Federal Ministry of Economics has already arranged with KfW that the agreed three billion euro loan can flow immediately. The state development bank did not comment on this, and the ministry was initially unable to obtain an opinion.
Lufthansa shares under pressure
At the close of trading, the Lufthansa share fell 6.23 percent to EUR 8.99 via XETRA.
“Now the dilution due to state entry is already coming into focus,” said a stock exchange trader. At an extraordinary general meeting on Thursday after the stock market closed, the company’s shareholders ultimately voted by a large majority for the state to take on a new stake with a 20 percent equity interest for around 300 million euros. Associated with this is the rescue package, totaling nine billion euros, which had been laboriously negotiated between Frankfurt, Berlin and Brussels in the weeks before.
The news of the approval is good because it removes uncertainty and paves the way for a recovery, commented analyst Daniel Roeska from the US analysis firm Bernstein Research. But the airline had a lot to do given its debt burden, he said.
Similarly, analyst Dirk Schlamp from DZ Bank said: With the approval of the shareholders for the state entry, the risk of insolvency was initially eliminated, but major challenges remained. Because in his opinion, the aviation industry should only reach the pre-crisis level again in 2023 or 2024.
His colleague Sven Diermeier from the research firm Independent Research stated that with the state aid package, the shareholders had opted for the lesser evil compared to a protective shield procedure that would probably have resulted in a total loss.
The corona pandemic transformed Lufthansa from a flagship airline in the Dax to a bankruptcy candidate in the MDax within a few weeks. Because almost all flights were canceled for months, the majority of the earnings failed to materialize, and the business was only likely to recover very slowly, the company threatened to run out of money.
After the Corona crisis Financial markets had fully registered in February, the price fell by more than half to just over 7 euros by the end of April. Up to the beginning of June it went up again to a good 12.50 euros. The share recently fluctuated between nine and ten euros. In places, the group was just worth around 4.5 billion euros on the stock exchange – less than half of the planned aid package and less than what the state gave the group new shares and want to make silent contributions to equity.
dpa / Reuters
Image sources: Vacclav / Shutterstock.com, Tupungato / Shutterstock.com
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