Lufthansa soars after top shareholder backs bailout

Billionaire Heinz Hermann Thiele’s backing for the Lufthansa deal will come as a relief for Chancellor Angela Merkel, who can ill afford another business collapse. (AFP)
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Updated 26 June 2020

Lufthansa soars after top shareholder backs bailout

  • Flagship airline wins 11th-hour reprieve with government set to take 20% stake

FRANKFURT, Germany: Lufthansa shares jumped around 15 percent on Thursday after its top shareholder dropped his objections to a €9 billion ($10 billion) government bailout for the German airline brought to the brink of collapse by the pandemic.

“I will vote for the proposal,” billionaire investor Heinz Hermann Thiele, who recently increased his stake in Lufthansa to 15.5 percent, told the Frankfurter Allgemeine daily on Wednesday.

His endorsement amounts to an 11th-hour reprieve for Germany’s flagship airline after fears had swirled he might veto the proposed rescue, which will see the government take a 20 percent stake and board seats, diluting existing shareholdings.

Shareholders are due to vote on the plan later on Thursday at a meeting held online due to the pandemic. Thiele has a virtual veto, as only 38 percent of shareholders have registered to vote.

Thiele’s backing will come as a relief to Chancellor Angela Merkel, who could ill afford another high-profile business collapse following the failure of payments firm Wirecard.

Lufthansa, which traces its roots back almost a century, employs around 138,000 people and owns brands, including Eurowings and Austrian Airlines.

It has been brought to its knees by COVID-19 and what promises to be a protracted travel slump, and like many rivals across the world, sought state help to stay afloat. Even after Thursday’s gains, its shares are down almost 40 percent this year.

Also on Thursday, European Union regulators approved Lufthansa’s €6 billion recapitalization, part of the bailout deal, subject to a ban on dividends, share buybacks and some acquisitions until state support is repaid.

Concerned a government stake would make it harder for Lufthansa to make tough decisions about restructuring and job cuts, Thiele had instead proposed an indirect government holding in the airline via Germany’s KfW development bank.

That sparked fears the bailout would fail and Lufthansa would have to seek protection from creditors within days.

Thiele said that talks with the government on Monday had not removed his doubts: “Differences remain with government representatives,” he told the newspaper.

HIGHLIGHTS

  • Billionaire Thiele drops objections to bailout.
  • Shareholders to vote on rescue plan at EGM.
  • Plan to see state take 20% stake in Lufthansa.
  • Cost-cutting deal struck with cabin crew union.

But he said he could not have voted for insolvency, even though his investment would continue to be at risk. He said he would continue to seek to influence the company’s development in the future, although declining to say how.

Thiele said it was in the interests of Lufthansa employees that management quickly negotiate restructuring with unions.

Up to 22,000 jobs could be at risk at the airline.

Lufthansa struck a deal overnight with the UFO union representing German cabin crew that is set to reap more than €500 million in savings, including steps to stop pay rises, cut working hours, and a cap on pension contributions.

Lufthansa said on Tuesday it had not yet reached a deal with services union Verdi. More talks are scheduled.


Saudi private sector rebounds with growth at 10-month high

Updated 04 December 2020

Saudi private sector rebounds with growth at 10-month high

  • Steep rise in sales and growing business confidence spark jump in purchasing, hiring activity

RIYADH: Business activity in Saudi Arabia has risen to its highest level since January this year, showing the Kingdom’s economy is beginning to overcome the worst effects of the coronavirus pandemic.

According to IHS Markit’s Purchasing Managers’ Index (PMI) Survey, the acceleration of output growth in the Saudi economy in November was driven by a steep rise in sales and strengthening business confidence.

The survey found that input purchasing rose, while employment growth also returned for the first time since January. Input cost inflation also quickened, leading to a stronger increase in average output charges.

The index has now registered above the 50.0 no-change mark for three months in a row, highlighting a sustained recovery after the economic downturn due to the pandemic.

The Saudi PMI rose to 54.7 in November from 51 the previous month — the strongest improvement since January. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared with the previous month, and below 50 an overall decrease.

Both domestic and foreign sales rose last month, marking only the second upturn in new export orders since February.

Business confidence for the year ahead also improved notably during the month. In particular, firms were encouraged by the Saudi government’s easing of lockdown curbs and news of a breakthrough in the development of a vaccine.

Accelerated rises in output and new orders led Saudi firms to sharply expand purchasing activity during November. In addition, hiring activity turned positive and a number of companies linked increased employment to rising demand.

Commenting on the latest survey, David Owen, an economist at IHS Markit, said: “A third successive rise in the Saudi Arabia PMI pointed to an economy getting back on its feet in November. Supported by output and new business growth reaching 10-month highs, the data suggests a strong end to the year for the non-oil private sector. Notably, employment started to rise, while business confidence strengthened in the wake of encouraging vaccine news and sharper demand growth.”

Saudi economist and financial analyst Talat Zaki Hafiz told Arab News: “The improvement is due to many factors, such as the reopening of the market with the ease in lockdown and, finally, the lifting of the curfew. The return to normality has had a significant impact on private sector performance.”

Hafiz added: “Things will get much better by the next year. We have also noticed an improvement in oil prices recently and this will improve things significantly.”