Lufthansa board baulks at EU bailout terms

Lufthansa's board needs more time to analyse the terms of a €9bn bailout. [Photo: David Lech/Shutterstock]

The board of German airline Lufthansa refused to accept the conditions of a €9 billion aid package on Wednesday (27 May), citing the European Commission’s reported requirement that the carrier give up some airport slots at two of its major hubs.

Lufthansa executives reached a bailout agreement with the German government on Monday (25 May) that still needs both supervisory board and EU approval in order for payments to start flowing.

In what is the largest airline bailout to date in Europe, Berlin agreed to take a sizeable stake in the company in order to help it survive the slump in air travel demand caused by the coronavirus outbreak.

Yesterday, the airline’s board delayed a decision on the €9 billion package, saying in a statement that the Commission’s terms “must be analysed intensively” before approval can be granted.

“The Supervisory Board has taken note of the conditions currently indicated by the EU Commission. They would lead to a weakening of the hub function at Lufthansa’s home airports in Frankfurt and Munich,” read the airline’s statement.

Lufthansa's €9bn virus bailout gets Berlin's blessing

German airline Lufthansa sealed a €9 billion aid package on Monday (25 May), as the government agreed to provide loans and stabilisation measures in return for a 20% stake in the carrier, with an option to increase to a blocking minority if needed.

According to media reports, the EU executive wants Lufthansa to give up 72 of its lucrative take-off and landing slots at the two airports, on a permanent basis. The airline is reportedly willing to consider it if the sell-off is a temporary measure only.

The board said that they must deliberate further on “the resulting economic impact on the company and on the planned repayment of the stabilisation measures, as well as possible alternative scenarios.”

But the statement did add that the airline “continues to regard WSF [the German government’s bailout fund] stabilisation measures as the only viable alternative for maintaining solvency,” further suggesting that an agreement is still possible.

A Commission spokesperson told EURACTIV that the institution had no comment on specific state aid cases but acknowledged that no formal notification of the bailout deal had been made yet.

German Minister for Economy Peter Altmaier said that it is “not only in Germany’s interests but also in the EU’s interests to avoid a sell-off of strategic interests in the industrial sector as a result of this pandemic.”

Under the terms of the package, the government would take a 20% share in the firm, which would increase to 25% plus one share in the event of a hostile takeover bid. Berlin has pledged only to use its voting rights in that particular scenario.

The government would also appoint two independent representatives to the supervisory board.

Lufthansa’s subsidiary Brussels Airlines might also fall foul of the EU’s competition services. According to De Tijd, the Belgian government’s insistence on a board seat in return for nearly €300 million in aid is not consistent with state aid rules.

Even the bloc’s new relaxed state aid rules, implemented to help countries deal with the virus crisis, say that bailout measures must be temporary and limited to six years to prevent long-term market disruption. Talks continue.

Brussels Airlines to cut staff, fleet and destinations

Brussels Airline announced a major restructuring of its business on Tuesday (12 May), including job cuts that could affect 1,000 employees, a reduction in fleet size and a smaller network of destinations.

(Edited by Frédéric Simon)

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