The EU Commission, Lufthansa and the federal government have agreed on a compromise that should enable the state to rescue Germany’s largest airline. Some critics balk at the tough conditions from Brussels, others at the potential profiteers of the deal.
After tough negotiations between Brussels and Berlin, the rescue package for Lufthansa, which was badly hit, has cleared an important hurdle. The Federal Government and the EU Commission agreed on the capital injection requirements and the Lufthansa Executive Board agreed. Accordingly, the largest German airline would have to hand over take-off and landing rights to competitors at its most important airports in Frankfurt and Munich. But the agreement is only an intermediate step. The supervisory board and shareholders must advise and formal approval from Brussels is still pending.
Federal Minister of Economics Peter Altmaier was pleased with “good Pentecost news for over 100,000 Lufthansa employees and their families”. On Twitter, he wrote: “Today’s breakthrough in the talks with Brussels makes it clear that Lufthansa will remain a large and globally successful airline!”
Other reactions were subdued. The head of the CDU / CSU MPs in the European Parliament, Daniel Caspary, criticized the line of EU competition commissioner Margrethe Vestager, which had imposed the requirements for Lufthansa. “As with the prevented merger of the train division of Siemens and Alstom, the following applies to the Lufthansa requirements: The main competitors are located outside Europe, and they can now laugh at each other,” said Caspary. “It will permanently damage European competitiveness.” Green MEP Rasmus Andresen, on the other hand, praised the fact that the compromise ensured fair competition between the airlines. “However, we would like binding climate regulations from both the German government and the EU Commission,” added Andresen. Berlin and Brussels had been negotiating for days. An overview:
The initial situation:
Lockdown, travel warnings, citizens’ money worries: The corona crisis has hardly hit an industry as hard as aviation. Like many airlines worldwide, Lufthansa came under enormous pressure. The company’s business with the exception of freight has almost come to a standstill. In the group with around 138,000 employees, tens of thousands of jobs are on the brink. That is why the federal government wants to support the airline with a nine-billion euro aid package. Otherwise, Lufthansa threatens to run out of money. The EU Commission has to approve such aid and strictly monitors whether it could harm competition. Vestager argues that otherwise airline ticket prices could ultimately go up and consumers will suffer.
The terms
Take-off and landing rights – so-called slots – are an important factor in aviation. In order not to weaken competition in the market, Lufthansa should give up slots for state aid, said Vestager. “If you want to compete with them, you need slots at an airport,” said the Danish. The low-cost airline Ryanair had already complained of a massive distortion of competition. The billion dollar aid from the German government would further strengthen Lufthansa’s monopoly-like access to the German aviation market, criticized the Irish airline. Ryanair chief Michael O’Leary had announced that he would take action against the state aid.
As announced during the night, Lufthansa had to make fewer concessions than originally requested by the commission. The company is therefore obliged to transfer the stationing of up to four aircraft and up to 24 take-off and landing rights to one competitor at each of the airports in Frankfurt and Munich. According to the “Handelsblatt”, the EU Commission initially requested the delivery of 20 jets. Lufthansa had offered to hand in 3 aircraft, but the EU Commission had refused, according to the report.
The now found option would only be available to new competitors at Frankfurt and Munich airports for at least a year and a half, the company said. If no new competitor makes use of the option, the option will also be extended to existing competitors at the respective airports. The slots are to be allocated using the bidding process – only to a European competitor who has not received any significant state recapitalization due to the corona pandemic.
The possible profiteers
“Ryanair and Easyjet are likely to benefit from the EU Commission’s requirements for the submission of flight and landing rights by Lufthansa,” said Fabio De Masi, left-wing parliamentary group vice-president. A look at the flight schedules shows that this is true: Ryanair, which wants to get through the crisis without state aid, has been flying to Germany’s largest airport Frankfurt so far, but is not yet represented in Munich. Conversely, the British low-cost airline Easyjet offers flights from Munich, but has only just withdrawn from Frankfurt. De Masi criticizes: “The EU Commission promotes dumping in the sky”.
the next steps
The Lufthansa Supervisory Board now has to approve the rescue package including the EU requirements. The company then plans to convene an extraordinary general meeting promptly to obtain shareholder approval for the package. For formal approval by the EU Commission, the state aid package must first be officially registered in Brussels. The Commission will then examine this “with priority”. The airline praised the airline’s commitments as being favorable for competition and consumers. The Ministry of Economic Affairs also points out that the agreement is not yet dry: “In addition, the talks with the EU Commission on state aid approval are ongoing,” said a statement. But: “With the intermediate step now achieved, the way is cleared for referral to the Annual General Meeting.”
The rescue plan
The rescue plan for Lufthansa provides that the state economic stabilization fund will subscribe to shares in the course of a capital increase in order to build up a 20 percent stake in the airline’s share capital. In addition, silent deposits totaling up to EUR 5.7 billion and a loan of up to EUR 3 billion are planned.
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