Lufthansa may be forced to give up coveted slots at Frankfurt and Munich airports as the European Commission pushes to attach conditions to Germany’s €9bn bailout of the airline and rival Ryanair threatens to challenge the deal.
Angela Merkel’s administration agreed on Monday to support the country’s national carrier, which has been appealing for state aid in four countries as the coronavirus crisis cut its operations to just 1 per cent of its regular capacity.
As part of the rescue package, Berlin will take a 20 per cent stake in Europe’s second-largest airline, which was first privatised in 1997, with the option of increasing that to a blocking minority of 25 per cent, plus one share, in the event of a hostile takeover bid.
However, EU officials are concerned that the deal may undermine competition and are in discussions to force the airline to get rid of some slots to make sure rivals have a fair advantage, people with direct knowledge of the discussions said.
Michael O’Leary, chief executive at Ryanair, also joined the fray, saying his low-cost airline was planning to lodge an appeal against the rescue package, which he said would “further strengthen Lufthansa’s monopoly-like grip on the German air travel market”.
“Lufthansa is addicted to state aid,” Mr O’Leary added, arguing that the €9bn bailout would allow the group to “engage in below-cost selling or buy up even more competition for the next number of years”.
Ms Merkel’s party, the CDU, hit back at talks in Brussels over reducing slots, warning that Lufthansa’s bailout, which it referred to as a “temporary strengthening of a European flagship carrier” must not be jeopardised by “overregulation in Brussels”.
“The hubs of Frankfurt and Munich must not be weakened in relation to Paris and Amsterdam,” said Ulrich Lange, the deputy chairman of the CDU and CSU group in the German parliament.
Sources in Brussels stressed the remedies being sought by the European Commission would not undermine Lufthansa’s business model and that any divestitures were aimed at ensuring a level playing field and in proportion to the advantages the German carrier already receives.
In the past Lufthansa has offered to sell slots to get deals such as its acquisition of Air Berlin cleared.
The German group, which includes Austrian, Brussels, Swiss and Eurowings airlines, holds more than two-thirds of the slots at Munich and Frankfurt, its two main hubs, and roughly 60 per cent of the available slots at Vienna and Zurich airports.
Following Monday’s announcement, unions, investors and political figures warned against relinquishing slots.
Markus Söder, prime minister of Bavaria and the head of the CSU, part of Angela Merkel’s governing coalition in Berlin, said he opposed offering slots at Munich airport to “some low-cost providers, who, by the way, do not accept that they have the responsibility for employees and workers that Lufthansa has”.
His counterpart in Hessen, in which Frankfurt is situated, told the Financial Times that Germany must do “everything in its power” to protect the international hub in the city. Volker Bouffier, a member of the CDU, added that he was “glad that the German chancellor sees this in the same way”.
Investors, whose shares will be diluted once Berlin builds its stake, have also opposed such moves.
Patrick Schuchter, portfolio manager at institutional investor Union, said the possibility of EU intervention in slot rights was like a “sword of Damocles over Lufthansa shareholders” and urged the government to fight against it.
Lufthansa refused to comment. Its shares were up 7 per cent on Tuesday.
Additional reporting by Guy Chazan in Berlin
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2020-05-26 15:38:02Z
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