LUFTHANSA AIRLINE IS AT RISK OF BANKRUPTCY

Every hour, the largest European air carrier loses about $ 1 million. On May 5, at the general meeting of the shareholders, it was announced that the general losses of the corporation, caused by the pandemic and its consequences, amounted to $ 1.3 billion. The shareholders decided to abandon the distribution of the profits, earned over the past year (almost $ 300 million). However, even such an amount cannot save the company from the consequences of the financial hole in which it found itself.

A catastrophic situation could be improved by the financial support from the state. However, it will not be given for free. It is known that the negotiations with the German leadership are already underway.

The company expects to receive € 10 billion in exchange for a 25.1% stake, which the government will receive as a result of the deal.

€ 5.5 billion is planned to be exchanged for the shares, giving a right for dividends, but without a right to vote. It is expected that the corporation will also be provided with an amount of € 5 billion as a support and about € 3 billion as additional loans, issued under the state guarantees.

Such measures cause dissatisfaction of the investors. They fear that having gained a place on the supervisory board of the company, the German authorities will be able to influence the process of implementing programs for further restructuring. Although the CEO of Lufthansa, Karsten Spur, insists on the prevention of any restrictions on freedom of the enterprise, the investors’ concerns remain.

The value of the company's shares fell by 56% since the beginning of 2020.

The demand for tickets has fallen several times Since March. The company was forced to cancel more than half of its flights. The decision affected the subsidiaries of the carrier as well. The hiring of new staff was completely suspended, and active negotiations began with labor unions in order to avoid dismissals and to enable some employees to do a part-time work.

As a result of the taken measures, 87 thousand employees of the corporation switched to a reduced work regime. The pilots, working for the corporation, stated that they were ready to cut salaries, provided that the management of Lufthansa does not file for bankruptcy.