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Lufthansa Shares Fall, Bailout Standoff

Lufthansa stock market shares were down on Monday as the German government held last-ditch talks with the airline group’s biggest shareholder. Its shareholder is threatening to block a 9 billion euro ($10 billion) bailout unless it adjusted its terms.

Its stock was down 5.2% as billionaire investor Heinz Hermann Thiele met senior government officials at the finance ministry. 

The coronavirus crisis has hit the Lufthansa airline hard. In addition, what promises to be a protracted travel slump forced it to seek a state rescue to avoid insolvency.

Thiele, a 79-year-old billionaire, has built up a 15.5% stake, -3.28%, making him the carrier’s largest shareholder.

He objects to bailout terms that would see Germany acquire a 20% stake and board seats, diluting existing shareholders. He has instead proposed an indirect holding via the country’s KfW Development Bank.

Thiele has pointed to other European airlines, including Air France-KLM AF, -3.70%. Those have received state aid in the form of loans rather than government shareholdings. An indirect state participation via state-owned development bank KFW, +0.52% could be an alternative to an outright government stake.

Lufthansa, a very Successful Company Before the Crisis

Monday’s stocks decline followed a weekend message from Lufthansa CEO Carsten Spohr. He told employees that less than 38% of shares were registered to vote at a key shareholder meeting on Thursday. It handed Thiele an effective veto on the bailout, which needs a two-thirds majority to pass. 

Lufthansa shares also exited Germany’s benchmark DAX index on Monday’s stock trading. This was a relegation announced early this month.

The group said last week that a no vote would force it to seek creditor protection to avoid insolvency. That could potentially lead to break-up pressures on the group. Their other carriers include Austrian Airlines, Brussels Airlines, and Swiss Airlines.

As well as posing a significant risk, a protective umbrella procedure for Lufthansa would be a great embarrassment. It would be a great embarrassment for Germany as an export nation. This was a statement from Kepler Cheuvreux analyst Ruxandra Haradau-Doeser.

The government refused to consider any changes to the complex bailout deal negotiated with Lufthansa management and the European Commission.

Finance Minister Olaf Scholz attended the talks with Thiele along with Economy Minister Peter Altmaier. He said beforehand that he expected the talks to produce a consensus behind the proposed deal.

Scholz said Lufthansa had been a very successful company before the crisis. So it’s their duty to make it feasible that they survive the COVID-19 pandemic.

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