Lufthansa’s €9 billion bail-out by the German state is in jeopardy after a leading shareholder requested detail on alternative funding plans.
The state aid package requires sign-off by Lufthansa shareholders at an extraordinary general meeting on June 25.
Lufthansa warned it would be forced to begin insolvency proceedings if the deal is not approved.
The €9 billion in aid was agreed with Germany’s Economic Stabilisation Fund (WSF) on May 25 and the Lufthansa board agreed to revised EC conditions, to surrender slots at Frankfurt and Munich airports, on May 30.
The deal will see the German state fund take a 20% stake in the carrier and two seats on the supervisory board, diluting the holdings of existing shareholders.
The challenge to the rescue package has been raised by Heinz-Hermann Thiele, billionaire owner of German brake manufacturer Knorr-Bremse, who owns in excess of 15% of Lufthansa.
In a statement, the Lufthansa executive board warned the stabilisation package was “not secured” but depends on the outcome of next week’s meeting.
It said attendance at the meeting is expected “to be below 50%” and warned: “In view of the latest public statements by the company’s largest single shareholder, Heinz-Hermann Thiele, the board considers it possible the stabilisation package could fail to achieve the two-thirds majority of votes cast that would be required.
“This would mean Deutsche Lufthansa AG would possibly have to apply for protective shield proceedings under insolvency law if no other solution is found immediately.”
Insolvency could follow within “a few days” of the meeting, the board said.
It noted that Thiele was critical of the conditions attached to the package in an interview with German newspaper, the Frankfurter Allgemeine Zeitung, and “left his approval open”.
Thiele has increased his holding in Lufthansa substantially through the period of lockdown, having had only a 5% stake in March.
He told the Frankfurter Allgemeine Zeitung he was “disturbed by the statement that there are no other solutions” available to Lufthansa.
The rescue deal requires a two-thirds majority in favour if the meeting attracts fewer than 50% of shareholders. If it is higher than 50%, a simple majority will suffice.
The Lufthansa board noted the virtual attendance at the group’s Annual General Meeting on May 5 was 33%.
It appealed to “all private and institutional shareholders to exercise their voting rights and to participate in the decision about the future of the company”.
Shareholders are required to register their attendance by June 20.
Lufthansa announced it will axe 22,000 jobs, about 16% of the workforce, last week with redundancy terms due to be agreed by June 22.
Restructuring is also underway at group carriers Brussels Airlines, which plans to cut 25% of its workforce, and Austrian Airlines which will cut wage costs by 20%.
The group has forecast air passenger demand will return so slowly that 300 of the group’s aircraft will remain parked in 2021 and 200 in 2022.
Europe’s largest airline group, Lufthansa has 763 aircraft, 700 of which were grounded until this month.