Lufthansa: German fund approves $9.8 billion in aid

The aid package would also require approval by a shareholder meeting. (Reuters)
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Updated 26 May 2020

Lufthansa: German fund approves $9.8 billion in aid

FRANKFURT: German airline Lufthansa said Monday it has received approval for a €9 billion ($9.8 billion) “stabilization package” from a government support fund to keep the company going through the turbulence from the coronavirus outbreak, but cautions the deal has not been approved by the EU’s executive commission.

Lufthansa, which has lost most of its passenger business due to travel restrictions during the outbreak, said the government’s fund has agreed to take nonvoting holdings in return for €5.7 billion, plus a €3 billion credit line and €300 million in share purchases.

That would leave the government fund with a 20-percent stake in the company and two seats on the board of directors. One of those seats would be on the audit committee. 

The airline said however that the government agreed not to vote its shares at shareholder meetings unless there was a takeover of the company.

The company’s trading statement said that the deal has not been approved by the European Commission, which could set conditions intended to preserve fair competition. 

The aid package would also require approval by a shareholder meeting.

German business publication Handelsblatt said that German Chancellor Angela Merkel was resisting a push by the commission to make Lufthansa give up prized landing slots at its Frankfurt and Munich hubs.


Oil giants’ production cuts come to 1m bpd as they post massive write-downs

Updated 22 min 27 sec ago

Oil giants’ production cuts come to 1m bpd as they post massive write-downs

  • Crude output worldwide dropped sharply after the market crashed in April

LONDON: The world’s five largest oil companies collectively cut the value of their assets by nearly $50 billion in the second quarter, and slashed production rates as the coronavirus pandemic caused a drastic fall in fuel prices and demand.

The dramatic reductions in asset valuations and decline in output show the depth of the pain in the second quarter. Fuel demand at one point was down by more than 30 percent worldwide.

Several executives said they took massive write-downs because they expect demand to remain impaired for several more quarters as people travel less and use less fuel due to the ongoing global pandemic.

Of those five companies, only Exxon Mobil did not book sizeable impairments. But an ongoing reevaluation of its plans could lead to a “significant portion” of its assets being impaired, it reported, and signal the elimination of 20 percent or 4.4 billion barrels of its oil and gas reserves.

By contrast, BP took a $17 billion hit. It said it plans to recenter its spending in coming years around renewables and less on oil and natural gas.

Weak demand means oil producers must revisit business plans, said Lee Maginniss, managing director at consultants Alarez & Marsal. He said the goal should be to pump only what generates cash in excess of overhead costs.

“It’s low-cost production mode through the end of 2021 for sure, and to 2022 to the extent there are new development plans being contemplated,” Maginniss said.

London-based BP has previously said it plans to cut its overall output by roughly 1 million barrels of oil equivalent (BOEPD) by the end of 2030 from its current 3.6 million BOEPD.

Of the five, Exxon is the largest producer, with daily output of 3.64 million BOEPD, but its production dropped 408,000 BOEPD between the first and second quarters. The five majors, which include Chevron Corp, Royal Dutch Shell and Total SA, also cut capital expenditures by a combined $25 billion between the quarters.

Crude output worldwide dropped sharply after the market crashed in April. The Organization of the Petroleum Exporting Countries agreed to cut output by nearly 10 million barrels a day to balance out supply and demand in the market.