Maximise your Avios, air miles and hotel points

European Commission caves in to Lufthansa over its €9 billion bailout

Links on Head for Points may pay us an affiliate commission. A list of partners is here.

The saga of the Lufthansa bailout is finally over after the European Commission caved in to Lufthansa’s demands to – as near as matters – be given €9 billion with no preconditions.

You can read the full announcement on the Lufthansa website.

Lufthansa hasn’t got off entirely scot free, but near enough.  It’s not clear if Ryanair is able to take the deal to the courts, as it has been threatening.  It wouldn’t be surprising, as the deal is specifically designed to hit Ryanair as well as boost Lufthansa.

Lufthansa A340

What are the terms of the Lufthansa bailout?

As a reminder, the Supervisory Board of Deutsche Lufthansa refused to accept the terms of the €9 billion bailout which the main board had agreed on Monday.

It’s not as if the €9 billion had to be repaid.  Only €3 billion was in the form of a loan.  The rest of the investment carried heavy interest payments, to encourage the airline to pay it back, but there was no obligation to do so.

The proposed structure was:

€300 million to acquire a 20% shareholding

€5.7 billion in redeemable non-voting shares, of which €4.7 billion will carry a guaranteed 4% yield, rising in stages to 9.5% by 2027 

€3 billion as a three year direct loan provided by the state-run development bank KfW

Lufthansa's board rejects €9 billion Government bailout

What conditions had the European Commission proposed?

The deal was rejected because the Supervisory Board believed that the European Commission wanted too high a price.  Lufthansa had been asked to surrender 72 slot pairs (36 daily return flights) at both Frankfurt and Munich airports which the Supervisory Board felt was too much.

Lufthansa flies 300 aircraft out of Frankfurt and Munich.  The European Commission’s proposal would have meant that it would need to cut 12 aircraft.  It would still have enough slots to operate 288 planes.

To me, this seems like a pretty good deal for being given €9 billion, of which €6 billion is not repayable.

Apparently not.  Scare stories were put out by every branch of the airline suggesting that budget airlines might be able to gain a stronger foothold in Frankfurt and Munich and that this was clearly unacceptable …..

Lufthansa's board rejects €9 billion Government bailout

Despite Lufthansa having no cards to play – given that it is on the edge of insolvency – the European Commission gave in yesterday.

What is the new European Commission proposal for Lufthansa?

Lufthansa will now only need to give up 24 take-off and landing slots at both Frankfurt and Munich.  This is 2/3rd fewer divestments than originally proposed.

This means that Lufthansa is giving up a grand total of 12 flights per day at each airport.  Imagine how much damage it would do to British Airways if it had to give up 12 short-haul flights per day at Heathrow ……. virtually none at all.

However, giving up 12 slot pairs per day was STILL too much for Lufthansa to concede in return for €6 billion of free money and €3 billion of soft loans.

The European Commission therefore added additional clauses to soften the blow.

Only four aircraft will be allowed to operate the 12 slots

This means that the slots cannot be used for long-haul services, or even mid-range short-haul services, since this would require more aircraft.  Each aircraft will need to complete three return flights per day, which realistically restricts the choice of routes to a 2-hour range from Frankfurt or Munich.

For 18 months, the slots will only be offered to airlines who do not already fly from Frankfurt or Munich

This is a cunning one.  It means that Ryanair and easyJet are conveniently excluded.

If any airline does come forward, they will not have anywhere near enough capacity to build a market position to challenge Lufthansa.  At best, 12 flights per day would allow a competitor to fly 3-4 daily rotations on 3-4 European routes.  If the frequency was any lower, it wouldn’t attract any business passengers.

It is possible, in 18 months, that no-one has come forward and that existing carriers at Frankfurt and Munich can take the slots.  However, carriers which have received Government money during coronavirus will not be allowed to request them.  This leaves a small list of airlines, and if the definition of ‘substantial state recapitalization’ includes taking soft loans then easyJet and Wizz Air are excluded.

(I forgot to mention that the slots aren’t free, either.  There will be an auction process with Lufthansa receiving the proceeds.)

However you look at it, it is hard to see these ‘concessions’ as anything but a joke.  I can only hope that Michael O’Leary did not choke when he read about it.  I’m not sure if Ryanair does still have the ability to challenge the deal or not.

Comments (81)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Pb says:

    Perhaps someone could explain why British Banks were obliged to give up so much given govt support and Luft give up the ash trays , endorsed by the commission.
    This just provides ammunition for those who support Brexit .

  • Chris Heyes says:

    If this was BA or Virgin We would be saying well done a master stroke Brilliant
    Strange how different Airline, different country changes everyone’s perspective lol

  • Bazza says:

    Someone on here was saying how well managed Germany was? No dodgy dealing etc. What a joke!

  • David Cohen says:

    Vestager at the Commission did her own legs by allowing the bailout of Air France. Apparently a huge part of the argument to her was “you allowed the French to do it, so why can’t we”. And they make a good point, there were virtually no conditions with that deal at all.

  • James says:

    That’s the EU for you. 100% Germany running the show.

    • Nick says:

      Well it used to be the UK running everything until someone threw in the towel…

    • J says:


    • Anna says:

      I don’t know about Germany, they all seem to be able to break the rules when they feel like it. Hence Poland with the judiciary, Austria with the benefits system, Hungary apparently with the entire democratic process, Spain refusing to honour the EHIC arrangement (and not to mention illegally deploying rubber bullets against its citizens). So a couple of bailouts are no surprise really.

      • Lady London says:

        what did Austria do with benefits?

        • Anna says:

          LL, remember before the referendum when David Cameron asked Brussels if we could reduce the amount of benefits we pay to migrant workers under certain circumstances, and Brussels said NO and we accepted that? Well Austria unilaterally decided to do it anyway, and only pay benefits to workers from other EU countries at the rate they get in their own countries, which is contrary to EU law on equal treatment of citizens. I think the last update I read was Brussels offering a feeble protest and the Austrian government ignoring them (like they do with the requirement to take refugees).

          • Lady London says:

            Heh Heh good for Austria.

            On the other hand, a feeling of being flooded by migrants and crowded out of schools and medical care by migrants, was what then see won the Brexit vote.

  • AJA says:

    Can any Lufthansa subsidiary airline which doesn’t already fly to Frankfurt or Munich and which hasn’t received state funds eg Brussels Airlines apply for the slots? That way the wider Lufthansa group are still in control of the slots.

    It really is one rule for us and another rule for them. Well played Lufthansa. Shame on the EU. I hope Ryanair and Easyjet both contest this.

    It would be lovely if some other airline such as Jet Blue applied for these slots as feeder routes to long haul flights from LGW.

  • Tom says:

    Finally, a travel blog that actually gets it! Thanks for this Rob, the reporting of this by the other major (mostly US) blogs makes it clear they have zero understanding of the aviation market and should stick to reviewing flights paid for with advertiser money/US credit card sign ups rather than commenting on things like this.

    This requirement is almost a complete joke and undermines all the hard work over an extended period to create within the EU what is one of the world’s most competitive and consumer friendly aviation markets. These are two of the least competitive major airports in Europe and Lufthansa is barely going to notice this measure.

    Lufthansa was backed into a corner here, which is why it’s so shameful the EU Commission has caved in to Lufthansa and backed off from their original proposal when what they proposed was already fairly mild considering the situation and they held all the cards. €9bn in exchange for giving up 24 out of well over 1000 slots (that also can’t go to any serious competitor due to the way this is set up) sounds like a pretty dream deal to me if I were an LH Board Member.

    • Tom says:

      Oh and forgot to say, the other huge irony is at the same time as negotiating this bailout and the EU rolling over, LH was willfully violating EU regulations by refusing to give refunds to any customer…

    • Don says:

      How long have you been following relations with the EU and Germany? Nothing about this should surprise you.

      The EU have always had a cavalier attitude to law, including their own. The law is always bent to either further integration, preserve the Union and keep things toasty for Germany. Look at the BverfG. That’s a minor roadblock that will be ignored at huge cost. The Europhiles are completely missing what they’re trying to highlight. It’s not a matter of EU vs BverfG but a necessary highlighting that in a quasi-federation of states you cannot have MS which are bought up by the ECB.

      • J says:

        It was the UK where Parliament was illegally shut down and the PM openly says his advisor is above the law… Germany is the biggest country in the EU and biggest contributor, its influence isn’t disproportionate. The UK in the EU had a very good deal with significant influence and lots of opt outs.

        • Anna says:

          But neither of those relate to EU law or regulations, even if they were strictly true. As per my comment above, we have seen many EU member states flagrantly breaching EU regulations in the past few years. The UK is probably one of more compliant nations.

          • J says:

            The examples of Hungary and Poland are similar to the illegal shut down of Parliament in the UK. Unfortunately all three countries are governed by populists who don’t respect democratic norms.

          • Anna says:

            Legal opinion on the prorogation of parliament was divided, largely along political lines (which raises questions about the impartiality of the judiciary on both sides of the fence). It’s easy (not to mention lazy) to throw insults like “populist” around when you apparently can’t put an informed argument across.

          • J says:

            Legal opinion wasn’t “divided” – there was a judgement that it was illegal. But you seem to now be attacking the independence of the judiciary which funnily enough is what you earlier criticised Poland for doing! I don’t think it’s controversial to say that Boris is a populist – I could say a lot worse…

        • Paul74 says:


        • Bazza says:

          Looks Italy want to be an international laugh stock now? Eh?

  • Neil says:

    So the commission is literally begging them to take their money? This is clearly corruption at a high level. It amazes me they’re bending over backwards to give them money and Virgin Atlantic couldn’t get anything from our Government. Something is very bizarre!

This article is closed to new comments. Feel free to ask your question in the HfP forums.

The UK's biggest frequent flyer website uses cookies, which you can block via your browser settings. Continuing implies your consent to this policy. Our privacy policy is here.