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Luthansa is addicted to state aid - O'Leary

Following weeks of negotiation the German government is taking a 20% equity stake in Lufthansa as part of a €9 billion bailout of the carrier by the country’s Economic Stabilization Fund (WSF).

The WSF will pay €300m for its stake in Lufthansa, which will rise to 25% in the event of a missed interest payment or a takeover attempt on the carrier, with existing investors diluted.

Additionally the German government will take a “silent participation” of up to  €5.7 billion in Lufthansa which won’t entail any voting rights. This equity investment carries an initial coupon of 4% that rises to 9.5% by 2027.

The aid is subject to EU approval and prohibits the carrier from paying dividends. The stabilisation measures are supplemented by a syndicated credit facility of up to  €3 billion with the participation of KfW and private banks with a term of three years. This facility is still subject to the approval of relevant bodies.

The German government plans to sell its stake by the end of 2023 but it will nominate two people to sit on Lufthansa’s supervisory board in the interim.

The move was roundly condemned by Ryanair’s chief executive Michael O’Leary who has been a vocal critic of moves by European governments to prop-up airlines during the COVID 19 pandemic.

“Lufthansa is addicted to State Aid. Whenever there is a crisis, Lufthansa’s first reflex is to put its hand in the German Government’s pocket. While most other EU airlines can survive on just payroll support schemes (for which we are extremely grateful), Lufthansa claims it needs another €9bn from the German Govt, €1bn from the Swiss Govt, €800m from the Austrian Govt, and €500m from the Belgian Govt as it stumbles around Europe sucking up as much State Aid as it can possibly gather,” said O’Leary.

The Ryanair chief executive said that he would appeal against what he termed the “latest example” of illegal state aid to the carrier, which he said highlighted the hypocrisy of the German government regarding adhering to EU rules.

“It is deeply ironic that the German Govt, which lectures all other EU countries about respecting EU rules, has no difficulty breaking the State Aid rules when it comes to Lufthansa. It waved through Lufthansa’s purchase of Air Berlin two years ago, which gave Lufthansa a monopoly in the German domestic market, and now when Lufthansa claims it needs even more State subsidies, the German Government writes a cheque for €9bn, at a time when its competitors Ryanair, EasyJet, BA, among others, do not need such State subsidies to survive.

The German government continues to ignore EU rules when it suits them to subsidise large German companies, but then lectures every other EU Govt about respecting the rules when they ignore them,” he said.

Source: aviationnews-online