After many weeks of negotiations, shareholders in German flag carrier Lufthansa (LHA.DE) have agreed at an extraordinary general meeting to the conditions of a €9bn (£8.1bn, $10.08bn) government bailout, that includes Berlin taking a 20% stake in the airline and getting two seats on the supervisory board.
The airline had almost run out of runway, burning through €1m in cash reserves an hour trying to stay alive. Like its international rivals, Lufthansa was forced to ground most of its fleet for several months as the coronavirus pandemic spread to Europe and across the world.
Berlin will pay €300m for its shares. The rest of the package comprises €5.7bn as a silent capital contribution and €3bn as a loan from state-owned development bank KfW.
"We have no more money," Lufthansa management told shareholders in the online meeting on Thursday. "We will also have to implement painful personnel measures.”
Chief executive Carsten Spohr described the bailout as "without a doubt a historic moment for our company."
Ryanair chief executive Michael O’Leary had said in a statement in May that he will appeal at EU level against “this latest example of illegal state aid to Lufthansa, which will massively distort competition.”
"There is a good offer on the table, Lufthansa shareholders should accept it," federal finance minister Olaf Scholz had said on Thursday before the vote.
Lufthansa has been privatised since 1997 when it sold the last state-owned shares. Now, 23 years on, the government has stepped back in.
On 3 June, the airline reported first quarter net losses of €2.1bn, as lockdowns brought the global aviation industry to a standstill.
The deal appeared to be in danger of collapsing this week, after German billionaire Heinz Hermann Thiele, one of the country’s richest men, voiced strong opposition to the government getting such a large stake, and so cheaply, in the airline.
Thiele, the majority stakeholder in Knorr-Bremse, also recently sold off shares in the brakes company to the value of €750m, causing speculation that he would use it to increase his investment in the German flag carrier. He also has enough Lufthansa shares to have stopped the share sale at today’s meeting, due to a reduced amount of shareholders registered to participate.
In the final hours ahead of the shareholders meeting, Thiele did an about-face, telling the Frankfurter Allgemeine Zeitung on Wednesday evening that he would back the deal after all, as he did not want to be seen as having helped drive Lufthansa into bankruptcy.
Shortly before the AGM on Thursday, Lufthansa and cabin crew union UFO agreed on a package for staff that will protect them from being made redundant for four years, and a raft of other measures.
"With the crisis package that has now been decided, the company can avoid layoffs for the 22,000 cabin employees of Deutsche Lufthansa AG for the period of the crisis," Lufthansa said in a statement.
European Union regulators also signed off on the airline’s €6bn recapitalisation plan on Thursday, on the condition that there will be a ban on dividends, share buybacks and acquisitions until it has paid back its state aid.
Lufthansa already agreed with the EU Commission’s demands that it relinquish some landing slots at its hub airports of Frankfurt and Munich to competitor airlines.
In May, the EU approved a €7bn French state bailout for Air France-KLM (AF.PA).