Additional details surrounding Lufthansa's economic relief package have emerged in the last few days with Lufthansa's executive board approving to surrender vital slots at Frankfurt and Munich airports. Yesterday, the board agreed for the airline to release 24 take-off and landing slots at both airports to competitors. The supervisory board is yet to accept the decision.
State aid comes with conditions
It's been a turbulent week for Lufthansa after it reached an agreement with the Germany government on a bailout. On 25th May, the airline agreed to a $9.88bn economic recovery package under the Economic Stabilization Fund (WSF). However, the package was anything but free help.
While it had initially been thought that Lufthansa would be required to surrender 20% of its stake to the government, it was later discovered that the carrier would also need to give up slots. At the time, only six of Lufthansa's 300 Frankfurt and Munich slots were thought to be in jeopardy. It is now apparent that the EU commission is requesting 24 slots to be released.
Despite that, in a statement on 29th May, Lufthansa announced that its Executive Board had approved the condition. It said the following:
"At its meeting today, the Lufthansa Executive Board decided to accept the commitments offered by Germany to the EU Commission for the stabilization package negotiated with the Economic Stabilization Fund (WSF) of the Federal Republic of Germany...Lufthansa will, therefore, be obliged to transfer to one competitor each at the Frankfurt and Munich airports up to 24 take-off and landing rights (slots)."
Who will take the slots?
Under the condition, a competitor at both Frankfurt and Munich will station up to four aircraft at either airport. The airline could, therefore, claim three take-off and three landing slots per day. The slots will be auctioned in due course, pending the approval of Lufthansa's supervisory board and stakeholders.
One airline, in particular, has been rather vocal about Lufthansa's bailout. Ryanair CEO Michael O'Leary suggested earlier this week that Chancellor Angela Merkel scrap the "illegal State Aid scheme" for "ungrateful Lufthansa." In a statement, the airline went on to say that the deal would put airlines like Ryanair, British Airways and easyJet at a disadvantage since Lufthansa would be allowed to rule the German market.
The slots on offer represent under 10% of Lufthansa's holding in Frankfurt and Munich. However, their sale will level out the playing field for other competitors. For one and a half years, the slots will be open for new airlines at these airports. If no airline claims ownership, existing competitors will be allowed to bid on the slots.
Will the Supervisory Board approve?
Lufthansa's developments in the last few days have demonstrated a change of tune. While Lufthansa had at first rejected the historical bailout deal, it has now made a turnaround.
Surrendering some of its slots and other commitments in the deal, including state stakeholder involvement, shows how much Lufthansa values financial assistance right now. The decision won't be one that was taken lightly, given the sacrifice. However, having had a few days to mull over the package, it's more than likely that the supervisory board will accept.
The decision will then be shared in an extraordinary general meeting with stakeholders before it is finalized.
Who do you think will take Lufthansa's slots? Let us know your views in the comments.