Lufthansa is locked in crunch talks with the German government on the terms of a rescue deal, as it fights to avoid bankruptcy while keeping state influence at bay.
Europe’s leading global airline group held its first virtual annual general meeting on Tuesday, unveiling a billion ( billion) first quarter loss and painting a bleak picture of the outlook for global aviation, which has been brought to a virtual standstill by the coronavirus pandemic.
Lufthansa (DLAKY) declined to answer questions from shareholders regarding details of its bailout discussions, according to Bloomberg. It said last week that the Swiss government had agreed to guarantee 85% of a billion loan package for its Swiss carriers. The group also owns airlines in Germany, Austria and Belgium.
German weekly Der Spiegel and Bloomberg reported Friday that Lufthansa is negotiating a billion ( billion) bailout with Germany that would give the government 25.1% of the company and a seat on its supervisory board.
Lufthansa declined to comment on the reports. But the company said in a letter sent to staff on May 3 and shared with CNN Business that it believes talks “can be brought to a quick conclusion.”
“The support of the German government would be a decisive step for our future viability,” the executive board wrote in the letter. “Competitiveness and investment capability continue to be important prerequisites for this.”
Analysts are worried that government interference could hamper Lufthansa’s ability to quickly execute a planned restructuring program, which would trim its fleet by 13% and could result in as many as 10,000 job cuts. About two thirds of its staff, or more than 80,000 people, are already on reduced working hours.
CEO Carsten Spohr stressed Tuesday that Lufthansa wants to preserve its “entrepreneurial freedom of decision and action.”
“We therefore now need government support, but we do not need government management,” he told shareholders via video conference.
Adding a “political component” to Lufthansa’s board will make things much more difficult because history has shown that decisive action is the best way for an airline to survive a crisis, said Daniel Roeska, a senior research analyst at Bernstein.
“The bigger strategic worry is how long the government influence will be there,” he added. “We would hope that investors would also get a chance to participate in an equity raise to demonstrate their support for the company.”
