While Lufthansa is likely feeling relieved to have secured its enormous €9bn bailout package, it seems the European Commission expects it to pay the price for the help. The EC is reported to be requesting Lufthansa to give up some of its valuable slots at Frankfurt and Munich, as well as moving some of its aircraft out of Germany.
Lufthansa will be made to give up slots
As further details of the huge Lufthansa bailout begin to emerge, it appears the airline may have more strings attached than initially thought. While we knew the airline would be forced to hand over 20% of its company to Berlin, it now seems the European Commission wants to name its price for supporting the massive €9bn ($9.8bn) bailout package.
It appears that, in return for allowing the record-breaking bailout, Lufthansa could be forced to give up some key assets, namely some of its airport slots at Frankfurt and Munich. As reported in Bloomberg today, people close to the matter have said that the EC believes the aid package could give Lufthansa an unfair advantage against the competition. As such, they want the airline to surrender some critical slots in a bid to level the playing field.
The EU press office the publication that they had no specific comment on the Lufthansa slot plan but was in contact with the German government. In a statement the EU said,
“This is important to preserve the level playing field in the single market post-coronavirus crisis to the benefit of all European consumers and companies.”
Bloomberg further reports that the EU’s executive arm has said it would like the airline to reduce the number of aircraft based in Germany. No specific details have been revealed on how many slots it could be asked to surrender, but with both airports in high demand, these are valuable assets for Lufthansa to lose.
Chancellor Angela Merkel is reported by Handelsblatt to have said she won’t take any move on Lufthansa’s valuable slots lying down. At a meeting with senior party members this week, she said,
“We won’t allow that to happen.”
She further said that there would be a “tough fight” before Lufthansa gave up its slots.
Ryanair ready to fight
A staunch critic of Lufthansa for many reasons, CEO of Ryanair Michael O’Leary was predictably quick off the mark with his condemnation of the bailout deal. In a statement carried by Aviation24, he 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 €9bn from the German Govt, €1bn from the Swiss Govt, €800m from the Austrian Govt, and €500m from the Belgian Govt as it stumbles around Europe sucking up as much State Aid as it can possibly gather.”
He went on to question how airlines like his own and fellow low-cost carrier easyJet can possibly compete when the German airline has been bailed out so dramatically. He even called into question the Air Berlin deal, which he claims gave Lufthansa a monopoly in the German market.
O’Leary has long maintained that state aid is unfair, particularly when his own airline has received nothing so far. Ryanair even launched a legal challenge to state aid in Sweden and is expected to present challenges to other airline bailouts too.
For Lufthansa, the package has given it some breathing room in terms of paying wages and other unavoidable overheads, hopefully enough to see it through until travel demand picks up. However, the cost of being heavily burdened with debt and potentially giving up slots could set in on the back foot in the long term.