“Lufthansa is an impressive company with a very strong position in the market,” Vestager said today in Brussels. “We will soon be out of the crisis, so we must now protect competing companies.”
9 billion euros
Lufthansa concluded an agreement with the German government a week ago for an emergency aid package of 9 billion euros. The German state wants to take a 20 percent stake in society and pays 6 billion euros for it. The remaining 3 billion is a loan.
Brussels agrees in principle to the aid, but requires Lufthansa to give up certain slots at its airports in Munich and Frankfurt to competitors. These slots – the right to take off or land for a period of time – are very valuable to airlines.
Shareholders vote postponed
For that reason, the Lufthansa supervisory board does not want to know anything about the requirements of Brussels. They would weaken the position of society too much. The commissioners increased pressure on Brussels on Wednesday by postponing a vote by the shareholders. The emergency support can only continue if the shareholders have agreed to it.
But Vestager maintains that the Brussels requirements are fair, for exactly the same reason. “Slots are limited and therefore a powerful means of competition,” said the European Commissioner. Member States have agreed that submitting slots is a reasonable compensation for receiving State aid.
Risk of distortion of competition
She pointed out that there is “a big difference” between a loan and a capital injection in exchange for shares. If Germany takes an interest in Lufthansa, it counts as a strengthening of the company.
This increases confidence in the financial markets, which makes it easier for the company to access loans, for example. All in all, this poses ‘a high risk’ of distortion of competition, Vestager argues.
She says that an agreement on the aid package is also a high priority for Brussels, and that she is in close contact with the German government on the matter.
Ryanair pulls out all the stops
Moreover, it is not only the European Commission that believes that there is a high risk of distortion of competition. Michael O’Leary, CEO of competitor Ryanair, is a strong opponent of support for Lufthansa.
He believes that the emergency support package for Lufthansa – but also for Air France-KLM and Norwegian Airlines – is breaking European rules. He announced earlier this week that he will pull out all legal options to challenge this state aid.