Lufthansa warns of urgent need for bailout as talks drag on

Bloomberg

Deutsche Lufthansa AG’s management said the need for a multibillion-euro coronavirus bailout was becoming urgent as talks with the government in Berlin drag on.
In a letter to employees, the airline warned cash reserves continued to shrink while it
negotiates the 9 billion-euro ($9.9 billion) rescue package. Lufthansa’s board said it hoped the government would find the “political will” for a deal that would keep the carrier competitive against international airlines and meet with European Union approval.
“The question of when and in what structure the German government decides to support Lufthansa is becoming more and more urgent for us,” the company’s management board said in the letter seen by Bloomberg.
The shares fell 2.6% to 7.81 euros as of 10:32 am in Frankfurt, having halved in value since the start of the year.
The German government and Lufthansa have been locked in intensive talks for weeks over the rescue plan. While the Economic Ministry internally agreed on taking a stake of 25% plus one share, the chancellery is opposed to the move, people familiar with the matter said earlier.
Under German law, a 25% plus one share stake would enable the government to block motions at the company’s annual general meetings, giving it a veto over major decisions.
To break the impasse, one scenario under discussion would see the airline sell 9.3% of new shares to the government at a steep discount. An additional convertible bond could then give the government a blocking minority, if required. Such a move would also give the state upside potential from a rebound in Lufthansa shares.
Lufthansa executives are concerned the terms on offer would hamstring it against international competitors who’ve received less stringent bailout terms, a point the management board repeated in the letter.
Talks are ongoing and could stretch into next week, according to people familiar with the matter, who asked not to be identified because the details haven’t been disclosed.
The carrier declined to comment. Lufthansa is meanwhile running out of time and money, burning through 800 million euros each month after the coronavirus grounded most of its fleet.
Chief Executive Officer Carsten Spohr said on May 5 that the company had about
4 billion euros in cash remaining. The letter gave further details of Lufthansa’s expected fleet reductions for the coming years.