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Lufthansa Balks At EU Conditions For German Aid Package

FreightWaves

Deutsche Lufthansa AG (OTC: DLAKY) board of directors postponed a decision to accept a $9.8 billion economic relief package from the German government after European Union competition authorities said the airline would have to relinquish valuable slots at its hubs in Frankfurt and Munich.

Giving up takeoff and landing slots would harm the company's hub-and-spoke business model and finances, the board said in a statement on Wednesday. Nonetheless, it continues to regard Germany's "stabilization measures as the only viable alternative for maintaining solvency."

The EU demands led the board to also postpone a general meeting to seek shareholder approval for the bailout offer.

Slots are essentially flight quotas that authorities assign to airlines at busy airports and can give to competitors if most of the rights aren't utilized in a given year.

Lufthansa has been seeking aid in European countries where it has subsidiaries. Switzerland last month agreed to provide emergency support to one of those companies, Swiss International Air Lines.

Under Prime Minister Angela Merkel's plan, the government would take a 20% stake in Lufthansa in return for an injection of capital and loans.

Irish low-cost carrier Ryanair Holdings plc (NASDAQ: RYAAY) is pressing the EU to break Lufthansa's fortress hold on Frankfurt and Munich, where it controls three-quarters of the slots, and in Vienna and Zurich, where American Airlines Group Inc. (NASDAQ: AAL) and SWISS, respectively, dominate, according to the Financial Times.

German politicians also opposed the idea of dismantling the existing arrangement to benefit a low-cost carrier, the newspaper said.

Photo: Lufthansa

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