Lufthansa accepts Brussels deal over $10bn state lifeline
Biggest German corporate rescue since pandemic paves way for bailout
Lufthansa’s management board has accepted a more favorable set of demands from the European Commission in exchange for approval of a €9 billion ($10 billion) government bailout, the carrier said on Saturday, paving the way for its rescue.
The agreement comes after the airline’s supervisory board on Wednesday rejected an initial deal with Brussels including conditions that were significantly more painful. Lufthansa and the rest of the airline sector have been hard hit by what is expected to be a protracted travel slump due to the coronavirus pandemic.
Under the latest agreement, Lufthansa said it will be obliged to transfer up to 24 take-off and landing slots for up to four aircraft to one rival each at the Frankfurt and Munich airports.
This translates into three take-off and three landing rights per aircraft and day, it said, confirming what sources had earlier said.
“For one-and-a-half years, this option is only available to new competitors at the Frankfurt and Munich airports,” Lufthansa said, initially excluding budget carrier Ryanair. “If no new competitor makes use of this option, it will be extended to existing competitors at the respective airports.”
The previous deal had included forfeiting 72 slots used by 12 of 300 jets based at the Frankfurt and Munich airports, a source familiar with the matter said.
The slots, to be allocated in a bidding process, can be taken over only by a European peer that has not received substantial state aid during the pandemic, Lufthansa said.
The commision said once it has been officially notified by Germany on the aid package it will assess the issue as a matter of priority. “(Lufthansa’s remedies will) enable a viable entry or expansion of activities by other airlines at these airports to the benefit of consumers and effective competition,” it said in a statement.
The airline’s supervisory board needs to approve the deal, Lufthansa said, adding it would convene an extraordinary general meeting to obtain shareholder approval for the bailout.
The largest German corporate rescue since the coronavirus crisis struck will see the government get a 20 percent stake in Lufthansa, which could rise to 25 percent plus one share in the event of a takeover attempt. A deal would also give the government two seats on Lufthansa’s supervisory board.
Rivals such as Franco-Dutch group Air France-KLM and US carriers American Airlines, United Airlines and Delta Air Lines are all seeking state aid due to the economic effects of the pandemic. Germany, which has set up a €100 billion fund to take stakes in companies hit by the pandemic, said that it plans to sell the Lufthansa stake by the end of 2023. “The German government, Lufthansa and the European Commission have reached an important intermediate step in the aid negotiations,” the Economy Ministry said.
It said talks with the commission over state aid will continue.
HIGHLIGHTS
● Airline to transfer up to 24 slots at Frankfurt and Munich.
● This translates into six slots per aircraft and day.
● Supervisory board must approve agreement.