Dr Karl-Ludwig Kley, Chairman of the Supervisory Board of Lufthansa Group, told shareholders that insolvency loomed in the coming days if they rejected a proposed €9 billion stabilisation package from the German government.
Speaking during a virtual extraordinary general meeting, Kley was blunt in his appraisal of the situation. “We have no money,” he said, admitting that the Group is currently living on reserves accrued over the years.
It was a similar candid tone from Carsten Spohr, Chairman and CEO, who made a direct request to shareholders. Telling them the vote was their opportunity to save Lufthansa he acknowledged that voting for the financial package, which will see the German government take a three-year 20% stake in the Group, was also a vote for the dilution of their own shareholding. The alternative is insolvency and the loss of all shares he said.
The pandemic, he said, has bought the Group to its knees, warning that there will be no swift recovery for passenger revenues. The stabilisation package is therefore the best option, added Spohr, for the Group’s future viability, which will be based upon competitiveness and an ability to invest.
Spohr reconfirmed that by 2023, when, by general consensus, air travel will return to pre-COVID-19 rates, the Group will be smaller, have a leaner structure, be more agile and efficient, and have 100 less aircraft.
In the end, 98% voted to approve the measures, leading Spohr to declare: “The decision of our shareholders provides Lufthansa with a perspective for a successful future. We at Lufthansa are aware of our responsibility to pay back the up to €9 billion to the taxpayers as quickly as possible.”
The airline’s flight schedules will therefore be consistently expanded in the coming weeks. The plan is to include 90% of all originally planned short-haul destinations and 70% of all long-haul destinations in the flight schedule again by September.
Elsewhere, Air France-KLM Group Board of Directors has approved a financial support package backed by the Dutch State for KLM in the amount of €3.4 billion. The Dutch state aid to KLM comes in addition to the €7 billion in funding granted by the French State to Air France announced on 7 May 2020.
Conditions associated with the direct state loan are linked to the airline becoming more sustainable as well as the restored performance and competitiveness of KLM.
“Due to COVID-19 KLM is currently in an unprecedented crisis,” said Pieter Elbers, CEO of KLM. “The financing package is necessary to secure the long and difficult road of recovery in the coming period.”
State aid has come at a price for airlines, with stringent conditions imposed – whether it’s performance-related, structural changes or environmental obligations, national governments are having a stronger say in the operations of their state carriers – all of which have stressed their economic importance.
The coming years will see what these airlines have to deliver.