Lufthansa’s Executive Board has finally announced today, an agreement over the much-debated €9 billion bailout package between the German government and the EU Commission. The two parties were in talks throughout the week trying to negotiate a ‘compromise’ for the once-profitable Lufthansa.
The deal will see Lufthansa removing four aircraft from its Frankfurt and Munich bases to make room for competitors. But the highlight of the deal is that it will give up to 24 slots each at its Frankfurt and Munich airports to a competitor.
The only catch is that this competitor must be a new European carrier, otherwise, the privilege will roll over to existing names in the industry after a year and a half. The slots will be up for grabs in a bidding format. Ironically, this offer extends to only those competitors who haven’t committed the ‘sin’ of “substantial state recapitalization.”
As we’ve reported before, it was never a question of whether the Lufthansa Group signs a bailout package. It was only a question of when. We saw how the EU and German state have wrestled to come up with an appealing package for stakeholders ever since talks began between the two.
At one point, Lufthansa hinted at not going ahead with the deal, fearing tough clauses put forward by the European Commission. The release mentions: “The scope of the conditions required in the EU Commission’s view has been reduced in comparison with initial indications.”
Lufthansa’s giant cash injection won’t come without a price, however. The multi-billion-dollar bailout package will make the German government Lufthansa’s largest stakeholder. Not bad if you consider the current aviation climate. The hefty price tag, however, is perplexing.
Does Germany’s largest carrier really need €9 billion dollars to stay afloat? Or is this just a “stay on the safe side” decision. Lufthansa’s Supervisory Board, however, is yet to approve the package and it will make further mediation in its upcoming Extraordinary General Meeting.