Lufthansa board gives green light to €9bn bailout

Lufthansa aircraft parked up at Frankfurt/Main, Germany, 23 March 2020. [Photo: EPA-EFE/THORSTEN WAGNER]

The supervisory board of German airline Lufthansa voted on Monday (1 June) in favour of the government’s €9 billion aid package, after the European Commission compromised on its conditions for approving the bailout.

Under a preliminary agreement with the Commission, Lufthansa will transfer 24 take-off and landing slots at both Frankfurt and Munich airports to other airlines, allowing the German government’s bailout to clear the competition regulator’s scrutiny.

It marks a climb-down by the EU executive, which is said to have initially asked for more slots to be surrendered without extra conditions. The current deal means that only European airlines that do not operate from those airports already will be eligible to bid for the lucrative slots.

“It was a very difficult decision. After intensive discussion, we have come to the conclusion to agree to the Executive Board’s proposal,” said Lufthansa supervisory board chairman Karl-Ludwig Kley. Shareholders will vote on 25 June during a general assembly.

The supervisory board had earlier last week refused to vote in favour of the deal, citing the Commission’s requirements as an untenable factor, but talks continued and a compromise was eventually struck.

Lufthansa board baulks at EU bailout terms

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.

According to the original aid agreement, the government will take a 20% share in the airline in return for €9bn in equity and loans, which can increase to 25% plus one share if Lufthansa is subject to a hostile takeover bid.

Berlin will also appoint two independent representatives to the supervisory board.

No hurdles

On Friday (29 May), EU competition chief Margrethe Vestager denied that her services were insisting that Lufthansa navigate extra hurdles, explaining that the Commission’s main role is to make sure a competitive level-playing field is preserved.

Advocates of the bailout pointed to the EU executive’s quick approval of aid packages for Air France and SAS, although both those airlines were either already partly state-owned or only on track to receive loans.

Vestager explained that state-involvement in large companies like the German flag-carrier would send a clear signal to investors and competitors about the viability of the firm and that corrections to single market disturbances must be made.

Vestager defends EU approach to Lufthansa mega bailout, as carrier agrees terms

EU competition chief Margrethe Vestager said on Friday (29 May) that the European Commission was not creating unnecessary obstacles to Lufthansa’s €9 billion bailout, shortly before the carrier agreed to accept the Commission’s set of conditions.

Vestager told Bloomberg TV on Monday that the Lufthansa deal would be used as a yardstick if companies like Air France or KLM decide to pursue recapitalisation measures instead of just liquidity, due to the increased impact on competition.

An official notification of the deal has yet to be made to the Commission, according to sources contacted by EURACTIV, so the exact details of which airlines will be able to bid for the slots at two of Germany’s busiest hubs still remain unclear.

Only carriers that are based in Europe, do not operate Frankfurt or Munich routes, and have not benefited from substantial state aid within the first 18 months will be eligible. Low-cost flyer Ryanair is already present at the airports so it will not be able to bid.

Coronavirus lockdown measures have cost Lufthansa a reported €1 million per hour, forcing the airline to plan reductions to both its workforce and aircraft fleet. The firm plans to meet with trade unions in order to discuss the “necessary restructuring measures”.

CEO Carsten Spohr said “the expected slow market recovery in global air traffic makes an adjustment of our capacities unavoidable. Among other things, we want to discuss with our collective bargaining and social partners how the impact of this development can be softened in the most socially acceptable way possible.”

[Edited by Zoran Radosavljevic]

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