Lufthansa shareholders back government bailout after being told bankruptcy loomed 'in the next few days'

25 June 2020, 17:33 | Updated: 25 June 2020, 18:52

Lufthansa shareholders have backed a €9bn (£8.1bn) government rescue package to secure the future of Germany's flagship airline.

The airline was one of many worldwide brought to the brink of collapse due to the COVID-19 pandemic, which saw a fall in demand for travel amid widespread restrictions and border closures.

The plan, backed by 98% of shareholders who voted at Thursday's online meeting, will see the German government take a 20% stake and two seats on the board.

The airline will also begin an extensive restructuring programme to cut costs but it could be years before it returns to its pre-virus state.

Lufthansa's management team had warned shareholders that the alternative was bankruptcy, which would see their holdings wiped out.

Some 80% of Lufthansa planes are grounded and the airline's chairman Karl-Ludwig Kley said the business had "run out of money".

He added: "We are living from the reserves we set aside [in good years].

"Without support, a bankruptcy looms in the next few days."

Mr Kley said the government is expected to sell its stake in the airline after the aviation sector has recovered.

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The deal looked likely to pass after billionaire shareholder Heinz-Hermann Thiele told the daily Frankfurter Allgemeine Zeitung that he would vote for it.

Mr Thiele, who has 15.5% of the airline, had previously voiced concerns that allowing the government a stake in the airline would hamper its ability to restructure.

Germany's stock market closed before the shareholder backing was announced but on news of Mr Thiele's support, the airline's stock was up 7%. Its shares have fallen by almost 40% this year, however.

Lufthansa employs 138,000 people and the company also owns Austrian Airlines and Swiss Air.

Earlier on Thursday, Lufthansa reached an agreement with the union representing cabin crew.

It allows the airline to save more than €500m between now and the end of 2023 but with a four-year guarantee against cabin crew redundancies.

The airline's restructuring plan could put 22,000 jobs at risk but chief executive Carsten Spohr told newspaper Bild that these might be avoided by reducing hours and wages.

European Union regulators also approved the bailout, subject to a ban on dividends, share buybacks and some acquisitions until the German government's support is repaid.