The final hurdle to the full privatisation of Lufthansa should be cleared by early September, when the framework to ensure the carrier remains in majority German ownership finally comes into effect.
State-owned bank Kreditanstalt für Wiederaufbau (KfW) currently holds the government's 37.5 per cent stake, but intends to sell it. A bill, which should be passed by the German parliament by 1 July, requires Lufthansa's voting shares to be registered and provides the carrier with sweeping powers to control the level of foreign holdings to avoid problems with traffic rights. All bearer shares will then be converted to registered shares by 8 September.
Lufthansa will be able to force foreign shareholders to sell their stock if foreign ownership exceeds 50 per cent, using the 'last in, first out' principle and starting with shares owned by non-European Union interests.
Lufthansa made its first ever first-quarter profit this year. The pre-tax profit of DM20 million (US$12 million) was a DM70 million improvement over the first quarter of 1996, helped by strong traffic growth, yield improvements, and cost cuts from Programme 15, under which the company aims to save DM1.5 billion ($900 million) a year by 2001. 'We have already identified concepts for saving DM850 million and are in the process of implementing them,' says chairman Jürgen Weber.
Lufthansa's cost-cutting plans were boosted in April when it settled its pay dispute with the DAG white-collar union and the carrier's two main unions, DAG and the ÖTV transport workers' union, agreed to combine future negotiations with Lufthansa. To get DAG's agreement, Lufthansa increased profit-sharing by DM100 for its 58,000 employees, gave limited union rights to end the two-year deal early, and extended job security guarantees from 1998 to 2001.
In calendar 1996, Lufthansa's internal cost savings were eclipsed by higher fuel prices, increased airport and air traffic control fees, pension provisions, and a poor cargo performance. Pre-tax profit fell by 9.3 per cent to DM686 million ($456 million) and return on capital was 4.9 per cent, compared to the medium-term target of 8 per cent.
Lufthansa Cargo slipped to a 1996 operating loss of DM60 million, though its first quarter 1997 loss fell sharply. Chief financial officer Klaus Schlede says domestic passenger operations lost 'a triple-digit million figure - enough to annoy us!'
Source: Airline Business