LDN - Business

Lufthansa accepts tweaked demands by Brussels over state bailout

[May 30, 2020] By Holger Hansen, Christoph Steitz and Ilona Wissenbach

BERLIN/FRANKFURT (Reuters) - Lufthansa's management board has accepted a more favourable set of demands from the European Commission in exchange for approval of a 9 billion euro ($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 takeoff 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 told Reuters.

"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.

INTERMEDIATE STEP

The slots, to be allocated in a bidding process, can be taken over only by a European peer that has not received any substantial state aid during the pandemic, Lufthansa said.

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Airplanes of German carrier Lufthansa are parked at the Berlin Schoenefeld airport, amid the spread of the coronavirus disease (COVID-19) in Schoenefeld, Germany, May 26, 2020. REUTERS/Fabrizio Bensch/File Photo

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% stake in Lufthansa, which could rise to 25% 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 U.S. 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 euro fund to take stakes in companies hit by the pandemic, said 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 in a statement.

It said talks with the Commission over state aid would continue.

($1 = 0.9011 euros)

(Additional reporting by Christian Kraemer and Yun Chee Foo; Editing by Sabine Wollrab, Sandra Maler, Jonathan Oatis and Will Dunham)

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