Germany and the European Commission agreed on Friday the terms of the air giant’s rescue.
The rescue to 9 billion euros (9.61 billion francs) of Lufthansa passed a crucial new step on Friday with an agreement between the German government and the European Commission on the main conditions of this operation which must avoid the bankruptcy of the group .
The airline giant will have to leave more room for competition at its two main German airports, the group said in a statement. A spokeswoman for the European executive and the German government also confirmed that an agreement had been reached.
The compromise between Berlin and Brussels thus provides that Lufthansa will cede to competitors up to 24 take-off and landing slots, very coveted and precious rights for airlines, representing 8 aircraft parked, according to the company.
“Concessions” of “reduced scope”
The executive board “accepts the concessions”, whose “extent has shrunk” compared to what was first mentioned, and is now awaiting the green light from the monitoring body, noted Lufthansa in the press release.
On Wednesday, this body had refused to approve the bailout, which includes the return of the state to the capital of the group, saying that European demands would “weaken” the company. The Commission had asked that Lufthansa sell up to 20 planes and more slots, according to a source familiar with the negotiations.
These rights, shared equally at the airports of Frankfurt and Munich and sold via auction, will be reserved for “new competitors” for a year and a half before companies already present in these two cities can buy them back if they are still available. “The slots should only be taken over by a European competitor who has not himself received public aid due to the coronavirus pandemic,” added the German group.
Once given its approval, the supervisory board must convene “soon” an extraordinary general meeting of shareholders, who must also approve the rescue because it involves a capital increase.
“The government, Lufthansa and the European Commission have taken an important step in the negotiations” which “paves the way for a consultation of the general assembly”, explains the Ministry of Economy in a press release. “Beyond that, negotiations continue.”
Time is running out as the coronavirus pandemic has brought global air transport to a near halt, plunging the industry into an unprecedented crisis. The German group’s cash reserves, which are losing 1 million euros (1.07 million francs) per hour and currently only transporting 1% of the usual number of passengers, are only enough for a few weeks. He also does not expect a rapid restart and has launched a restructuring aimed at reducing his fleet by 100 aircraft, threatening around 10,000 jobs.
In detail, the rescue provides that the State takes 20% of the group for 300 million euros (320.47 million francs), in addition to injecting 5.7 billion euros (6.09 billion francs ) non-voting funds, one billion of which can be converted into shares.
It would be the first time that the German state would return to the capital of the company since its complete privatization in 1997. Berlin also plans to be able to increase its stake to 25% and one share, the blocking minority, but only “in the event of ‘takeover bid by a third party’ or non-payment of interest.
Germany also guarantees a loan of 3 billion euros (3.20 billion francs) and obtains two seats on the supervisory board of Lufthansa, which is prohibited from paying dividends and paying bonuses to its leaders. Ryanair said it wanted to challenge the plan before European justice, calling it “illegal state aid that will dramatically distort competition.”
((AFP / NXP)
Posted today at 1:21 am