Lufthansa Group secured the approval of its shareholders to raise up to EUR5.5 billion euros (USD6.6 billion) in additional liquidity during the group's Annual General Meeting on May 4, 2021.
"The resolution is intended to enable us to increase our capital flexibly so that we can strengthen our balance sheet ratios again and return to our former financial stability. The timing and amount of a possible capital increase have not yet been decided. It will depend on various factors, not least of which is the further development of the crisis and our capital requirements resulting from this," Chief Executive Carsten Spohr told shareholders.
The proposal will see Lufthansa issue 2.15 billion new shares, to be done at a time of the carrier’s choosing, with a nominal share price of EUR2.56 (USD3.07) each. It was approved almost unanimously, with 97.79% of shareholders present voting in favour of the resolution.
Lufthansa Group said the capital is likely to be mainly used to repay the government stabilisation aid it received in 2020.
"Because - and we have stressed this time and again - given the choice, we prefer to finance ourselves on the capital markets rather than by the taxpayer," Spohr stressed.
The group received a total of EUR9 billion (USD10.8 billion) in various forms of aid. Of that amount, EUR5.5 billion (USD6.6 billion) was via the so-called silent participation of the German government, comprising EUR4.5 billion (USD5.4 billion) in equity and EUR1 billion (USD1.2 billion) as a convertible loan.
Lufthansa Group said the requested capital raise had been decided on in proportion to the silent participation amount but stressed that the sum was a "technicality" and would not prejudice future decisions regarding the amount of fresh capital sought. Chief Financial Officer Remco Steenbergen said during the group's quarterly earnings call that the actual amount requested would most likely be lower than the authorised sum. Lufthansa stressed that it sought an authorisation, which will be in place through May 2026, rather than a direct resolution covering a specific capital raise amount due to the additional flexibility such a solution provided.
The group's state aid also comprised a EUR1 billion (USD1.2 billion) syndicated loan, 80% of which was backed by the German state-owned development bank KfW, which was already repaid in February 2021, as well as EUR500 million (USD600 million) in direct equity from the German and Austrian governments and EUR2 billion (USD2.4 billion) in state-backed loans in Austria, Belgium, and Switzerland.
As of the end of 2020, before the repayment of the KfW-backed loan, Lufthansa Group had drawn EUR3.3 billion (USD4 billion) from the available state-backed facilities. At that time, it also had EUR3.9 billion (USD4.7 billion) in available liquidity from other sources.
Separately, Steenbergen revealed that Lufthansa had around 10,000 surplus staff.
"We aim to address this personnel surplus in Germany in the rest of 2021 and in 2022. It remains our preference to do so in mutual agreements with our social partners so that the burdens are distributed fairly, and more jobs can be saved by reducing costs instead of people," he stressed.
