The 9 billion euro rescue of Lufthansa passed a crucial new step on Friday, May 29, with an agreement reached between the German government and the European Commission on the main conditions of the operation.
The Management Board “Accept concessions” requested by Brussels, of which “The scale has diminished” compared to what was first mentioned, and now awaits the green light from the monitoring body, noted Lufthansa in the press release. On Wednesday, this body had refused to approve the rescue plan, which includes the return of the state to the capital of the group, considering that European demands “Would weaken” the company.
The Commission, which wants Lufthansa to leave more room for competition at its two main German airports, initially asked it to sell up to 20 planes and all the more take-off and landing slots, rights highly coveted and precious for the companies, according to a source close to the negotiations.
The agreed compromise finally provides that the airline will cede to competitors up to 24 slots, representing 8 parked aircraft, the group said in a statement. These rights, divided equally between the airports of Frankfurt and Munich, will be reserved for “New competitors” for a year and a half before companies already present in these two cities can buy them if they are still available.
“The slots should only be taken up by a European competitor who has not himself received public aid due to the pandemic due to the coronavirus”, adds the German group.
Continuation of negotiations
An extraordinary general meeting of shareholders must be convened “Soon”. They also have to approve the bailout as it involves a capital increase. The economy ministry said in a press release “Important step (…) paving the way for consultation of the general meeting”, while“Beyond that, negotiations continue”.
Time is running out, the German group’s cash reserves, which are losing a million euros an hour and currently only transporting 1% of the usual number of passengers, are only enough for a few weeks. He also doesn’t expect a quick reboot. It therefore launched a restructuring aimed at reducing its fleet of 100 aircraft, threatening around 10,000 jobs.
Negotiations are also continuing for the Belgian subsidiary Brussels Airlines, which announced in mid-May plans to cut a quarter of its workforce, and Austrian Airlines, which has asked Austria for 767 million euros. Bern will guarantee 1.2 billion euros in loans to the Swiss and Edelweiss subsidiaries.
Ryanair disputed plan
The rescue provides that the state will take 20% of the group for 300 million euros, in addition to injecting 5.7 billion euros in non-voting funds, of which one billion 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 reserves the right to increase its stake to 25% and one share, the blocking minority, but only “In the event of a third party takeover bid” or non-payment of interest.
Germany also guarantees a loan of 3 billion euros and obtains two seats on the supervisory board of Lufthansa, which is prohibited from paying dividends and paying bonuses to its directors.
Ryanair said it wanted to challenge the plan before European justice, calling it “Illegal state aid that will dramatically distort competition”.