EU denies creating ‘extra hurdles’ for Lufthansa bailout
Vestager says states rescues could be seen to strengthen a company and distort market
Margrethe Vestager, the EU competition chief, has rejected accusations that Brussels is creating “extra hurdles” for the €9bn bailout of Lufthansa, after the German group’s supervisory board balked at requests to relinquish lucrative slots at its hub airports in Frankfurt and Munich.
Speaking to journalists on Friday, Ms Vestager said rescue packages in which states injected large amounts of capital would be seen by investors as “a strengthening of the company”, and thus make it easier for saved businesses to raise money.
“There is a high risk that if you hold market power, that you are a big impressive company and you get a lot of aid, that competition will be disturbed,” she added.
On Monday, Germany agreed to support its national carrier with a capital injection of €5.7bn, as well as €3bn in government-backed loans, and €300m-worth of new Lufthansa shares, which would give Berlin a 20 per cent stake in the airline.
In the case of a hostile takeover attempt, Angela Merkel’s administration retains the right to increase its position to 25 per cent plus one share, which is a blocking minority in German law.
However, despite Lufthansa being weeks away from running out of cash, the company’s supervisory board refused to approve the bailout package on Wednesday, delaying the extraordinary general meeting needed to ratify the deal.
The board of Europe’s second-largest airline said it needed time to assess the impact of demands from the European Commission that it give up some slots in Munich and Frankfurt, where it holds two-thirds of the available capacity.
The group includes Austrian, Brussels, Swiss and Eurowings airlines.
Leading figures from Germany’s governing CDU and CSU parties have also strongly opposed the EU’s suggested remedies. Markus Söder, the prime minister of Bavaria, said he feared the slots would be given to low-cost operators, who would offer less secure jobs.
Michael O’Leary, the boss of Ryanair, threatened to lodge a complaint with the EU against the bailout, which he claims will “further strengthen Lufthansa’s monopoly like grip on the German air travel market”.
While not explicitly mentioning Ryanair, Ms Vestager said slots would be at the “centre of the debate” as they are a “limited” and “valuable” resource.
Ms Vestager’s comments came as 10 unions from across Germany, Austria, Switzerland and Belgium wrote to the commission, warning the body not to impose “massive restrictions” on Lufthansa.
“Neither employees of the Lufthansa group nor the citizens of Europe will understand if tens of thousands of jobs are lost not because of Covid-19, but because of conditions imposed by the EU Commission,” the letter read.
The unions also cautioned against giving up slots to low-cost competitors, who “have disregarded the rights of employees for years and have passed on their business risk to the workforce”.
On Friday, rating agency Moody’s warned that a “failure to swiftly finalise the negotiations on the support package . . . at a time when Lufthansa's liquidity position is eroding rapidly” could lead to a downgrade.