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Lufthansa agrees revised EC conditions on state aid

Lufthansa has accepted revised European Commission conditions on a €9 billion bail-out by the German state.

The Lufthansa management board agreed to hand over up to 24 take-off and landing slots at Frankfurt and Munich airports after refusing an earlier EC demand to relinquish 72 slots.

The agreement will allow the German government aid package to go through, pending its sign-off by Lufthansa Group’s supervisory board and shareholders.

The €9 billion aid provided by Germany’s economic stablisation fund (WSF) was agreed on May 25 and will see the state-backed fund take a minimum 20% stake in Lufthansa.

But the deal was put on hold after Lufthansa’s supervisory board refused to agree to the conditions the EC required.

The revised conditions will see Lufthansa “obliged to transfer to one competitor each at the Frankfurt and Munich airports up to 24 take-off and landing rights (slots)”.

It translates as three pairs of slots per aircraft per day for up to four aircraft at each airport – meaning 24 pairs of slots in total across Frankfurt and Munich.

Access to the slots will be restricted. In a statement, Lufthansa said: “For one and a half years, this option is only available to new competitors at Frankfurt and Munich airports.”

It will only be extended to Lufthansa’s existing competitors at the airports if the slots are not taken up within 18 months.

The slots, to be allocated via a bidding process, will also be unavailable to any carrier that has “received substantial state recapitalisation as a result of the corona pandemic”.

Lufthansa said: “The Lufthansa executive board decided to accept the commitments offered by Germany to the EU Commission for the stabilisation package negotiated with the Economic Stabilization Fund (WSF) of the Federal Republic of Germany.

“The scope of the conditions has been reduced in comparison with initial indications.”

The EC said in a statement that the remedies would “enable a viable entry or expansion of activities by other airlines at these airports to the benefit of consumers and effective competition”.

The Lufthansa Group holds about two-thirds of the slots at Frankfurt and Munich.

The bail-out, comprising a credit facility and loans, will see the German state take a 20% stake in Lufthansa, rising to 25% in the event of a hostile takeover attempt or delay in repayment.

The government will also take two seats on Lufthansa’s supervisory board.

Rejecting the original EC conditions, Lufthansa noted these “would lead to a weakening of the hub function at Lufthansa’s home airports” and compromise “the planned repayment of the stabilisation measures”.

The stand-off threatened to jeopardise Lufthansa’s survival, with the group’s board acknowledging the €9 billion deal remained “the only viable alternative for maintaining solvency”.

Lufthansa has warned it is haemorrhaging cash at a rate of €1 million an hour.

Ryanair called on the German government to abandon the deal this week and confirmed it would mount a legal challenge.

However, the German government appeared in no mood to bow to the legal threat or to the EC’s initial conditions.

Leaders of Germany’s governing party, the CDU, accused Brussels of “over-regulation” and the deputy chairman of the CDU/CSU group in the German parliament, Ulrich Lange said: “The hubs of Frankfurt and Munich must not be weakened.”

The €9 billion package comprises a €5.7 billion grant, €300 million to acquire shares and a credit facility of up to €3 billion.

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