(Bloomberg) — Deutsche Lufthansa AG’s biggest stockholder said he’d vote in favor of a 9 billion-euro ($10 billion) government bailout, giving the rescue plan a shot of momentum and boosting the airline’s shares and bonds on the eve of a crunch vote.Billionaire Heinz Hermann Thiele told Frankfurter Allgemeine Zeitung that he’d support the package at Thursday’s special shareholder meeting, ending days of frenzied speculation about his intentions. He had earlier criticized a steep discount being granted to the German government on a 20% stake, and held the votes to single-handedly stop the share sale.“I will vote in favor of the proposed resolution,” Thiele told the newspaper in an interview published on its website Wednesday. Lufthansa shares jumped as much as 21% Thursday in early Frankfurt trading, the biggest intraday rise since March 13.The news also triggered a sharp rally in Lufthansa debt, with the company’s euro bonds maturing in 2024 jumping the most on record to trade as high as 90.2 cents on the euro. The airline’s bonds were under pressure since March and a sell-off accelerated last month when the company lost its investment-grade rating at S&P.With Thiele’s support, the state rescue appears likely to secure the two-thirds backing required for approval. Because only 38% of shareholders registered for the meeting, Thiele’s 15.5% stake translates into about 41% of the votes. Lufthansa needs to win about half of the rest for the share sale to pass. It’s only part of the larger bailout package that also includes state loans and a so-called silent participation.Approval of the deal would bring the curtain down on weeks of high-stakes drama that’s buffeted Lufthansa’s stock and bonds and forced it to examine insolvency. It would also thrust the state back into the heart of a company that was privatized with fanfare two decades ago.Read more:One Man Can Save Lufthansa’s Bailout or Unleash BedlamLufthansa Closes German Charter Carrier With Loss of 1,200 JobsGermany Dares Lufthansa’s Top Shareholder to Scuttle BailoutLufthansa’s Fate Will Affect German Savers Holding Its DebtAnalysts at Societe Generale and Berenberg said they expect the measure to prevail Thursday with the support of the 79-year-old Thiele.Political VictorySecuring a state holding would be a victory for Finance Minister Olaf Scholz, pleasing his Social Democratic allies and bolstering his ambitions to run for chancellor next year. Economy Minister Peter Altmaier would notch a landmark deal that’s meant to serve as a model for the government’s plan to take a more activist approach to managing Germany’s economy.Andreas Laemmel, a member of the Bundestag’s economy and energy committee for Chancellor Angela Merkel’s bloc, said the negotiations with Lufthansa had served as a “learning process” for the government which will inform talks on possible future bailouts for other companies.“The aid package will protect the value of the shares and help the company be successful again,” Laemmel said Thursday in an interview with Deutschlandfunk radio. “That’s the best contribution that the government can make, giving shareholders security.”Unions, many investors and proxy advisory firms recommend shareholders back the deal. While stockholders will see their holdings diluted, it’s not clear what the rationale for blocking the package would be without a major investor proposing an alternative.“A government-orchestrated bailout is better than insolvency,” said Patrick Schuchter of Union Investment, holder of a 0.12% stake. He plans to vote for the rescue, despite the drawbacks for shareholders. “Investors need to choose the lesser evil or sell their shares.”Securing the bailout would allow Lufthansa’s management to turn their attention to negotiating a restructuring package with the company’s powerful labor unions. The company this week missed a June 22 deadline to reach agreement with worker representatives, underscoring the challenge Lufthansa faces in downsizing for what Chief Executive Officer Carsten Spohr predicts will be years of depressed travel demand.While Lufthansa earlier this month said it needed to slash around 22,000 jobs, Spohr said equivalent cost savings could be achieved by other means.“One idea is that not a fifth of employees has to go, but that for example everyone reduces working hours and salary by a fifth,” Spohr said in an interview with Germany’s Bild newspaper.The airline on Thursday said it reached a wage reduction deal with its cabin crew union that would save around 500 million euros for the duration of the crisis, and avoid compulsory redundancies.Airline DistressLufthansa shares had fallen about 40% this year after the coronavirus forced airlines across the globe to ground fleets. The market value of the biggest carrier in Europe declined to about $4.7 billion — less than one-third of Thiele’s fortune. It had warned previously that it was facing a cash crunch and would have trouble paying wages in July.Labor too has gotten behind the package, mindful of the potential for large-scale redundancies if the airline entered insolvency.“We extraordinarily welcome the decision to support the state aid package for Lufthansa at tomorrow’s annual general meeting,” Christine Behle, a supervisory board member and deputy chairman of labor union Ver.di, said in an emailed statement. “With this the survival of the company would be secured and an insolvency avoided.”The meeting starts at 12 p.m. in Frankfurt. Spohr will address shareholders before opening the floor to questions. The process could take several hours before the vote proceeds and the results are released later in the afternoon.(Updates with shares, bonds, lawmaker comments starting in first paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
