Update 27 May: Ryanair chief executive Michael O’Leary has said his company
will appeal against “this latest example of illegal state aid to Lufthansa,
which will massively distort competition and level playing field into provision
of flights to and from Germany for the next five years”.
In a statement, O’Leary said: “Lufthansa is addicted to
state aid. Whenever there is a crisis, Lufthansa’s first reflex is to put its
hand in the German government’s pocket. While most other EU airlines can
survive on just payroll support schemes (for which we are extremely grateful),
Lufthansa claims it needs another €9 billion from the German government, €1
billion from the Swiss government, €800 million from the Austrian government
and €500 million from the Belgian government as it stumbles around Europe
sucking up as much state aid as it can possibly gather.
“How can airlines like Ryanair, Easyjet and Laudamotion be
expected to compete with Lufthansa in the short-haul market to and from Germany
now that it has €9 billion worth of German government subsidies to allow it to
engage in below-cost selling or buy up even more competition for the next
number of years?”
Update 27 May: The supervisory board of Deutsche Lufthansa AG has delayed
calling an extraordinary general meeting to make a decision on whether or not
to accept the German government’s financing package, saying it needs more time to consider new conditions placed on the deal
by the European Commission.
Reports say the commission wants Lufthansa to give up some
of its airport slots at Frankfurt and Munich because it believes the aid
package could give it an unfair advantage over its competition.
In a statement, the group said: “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. The resulting economic impact on the company and on the
planned repayment of the stabilisation measures, as well as possible
alternative scenarios, must be analysed intensively.”
However, the company said the board still regards state aid as
“the only viable alternative for maintaining solvency”.
The Lufthansa Group has agreed a deal with the German
government worth €9 billion that will shore up the company’s finances to
survive the impact of the coronavirus pandemic.
Following weeks of negotiations with the Economic
Stabilisation Fund (WSF), the airline group will receive €5.7 billion in “silent
participation”, or non-voting capital, from the German government, some of
which can be converted into a 5 per cent equity stake – which would give the
government a voice on the group’s board.
Furthermore, Germany is acquiring a 20 per cent stake in the
share capital of the Lufthansa Group, though it intends to sell this by the end
of 2023.
Speaking at a press conference on Monday, Germany’s finance
minister Olaf Scholz said: “When the company is fit again, the state will sell
its stake and hopefully… with a small profit that puts us in a position to
finance the many, many requirements which we have to meet now, not only at this
company.”
The measures are supplemented by a €3 billion credit
facility for a term of three years.
According to Lufthansa, conditions of the bailout include the
waiver of future dividend payments and restrictions on management remuneration.
In addition, the German government will take two seats on Lufthansa’s
supervisory board.
The financing package still has to be agreed by Lufthansa’s
shareholders and the European Union, but if approved it could save up to 10,000
jobs at the firm, which warned in April that it expected to run out of cash
within weeks without government support.
The news comes as Lufthansa Group’s airlines prepare to reintroduce
more flights to their schedules in June. The group has said it does not expect passenger
demand to return to pre-coronavirus levels to return for several years and has permanently
decommissioned a number of aircraft to reduce its capacity at Frankfurt and
Munich. It has also closed all Germanwings operations and will speed up
restructuring programmes at Austrian Airlines and Brussels Airlines.