Amid EU and Ryanair concerns, Lufthansa's supervisory board delays acceptance of bailout package

Deutsche Lufthansa AG's Supervisory Board has today held-off on accepting the bailout package offered by the German government amid the conditions imposed by the European Union's Commission. The Supervisory Board has concerns that said conditions would stifle operations at the Lufthansa Frankfurt and Munich hubs, and have an eventual effect on the carrier's financial health in a post-pandemic situation.

A Lufthansa A350-900. Photo by Benjamin Liew | AeroNewsX

Ryanair, Europe’s largest, and possibly the most popular low-cost carrier, issued a statement on Tuesday, May 26th, which condemned the German government’s decision to award €9 billion of state aid to Lufthansa on top of the extensive payroll support already given to the German airline. Ryanair believes this will be a catalyst that will further strengthen Lufthansa’s monopoly-like hold on the German air travel market (think Lufthansa Group - not just the flag carrier itself).

Ryanair’s complaints have stemmed from the German and French Governments continuing to provide a great deal of state aid and payroll support to their respective airlines, and although most governments have been taking a stake in return for subsidizing the airlines receiving support, Ryanair is concerned that many of the airlines that are receiving such aid simply are sufficiently well-off that they do not require it, which further distorts the competition with other carriers across Europe (meaning low-cost carriers like Ryanair).

Non-state aided airlines such as Ryanair, easyJet, British Airways, Virgin Atlantic, amongst others, will now have to compete with Lufthansa in both the short haul and long haul markets without similar state intervention, whereas Lufthansa can use this latest €9 billion subsidy from the government to engage in below-sustainable prices for selling seats on its short haul, intra-EU routes, as well as its long haul routes.

Ryanair’s Group CEO Michael O’Leary said:“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 €9 billion from the German Government, €1 billion from the Swiss Government, €800 million from the Austrian Government, and €500m from the Belgian Government as it stumbles around Europe sucking up as much state aid as it can possibly gather. How can airlines like Ryanair, easyJet and Laudamotion be expected to compete with Lufthansa in the short haul market to and from Germany, now that it has €9 billion worth of German government subsidies to allow it to engage in below cost selling or buy up even more competition for the next number of years.”

However, it might be seen as a little hypocritical that Ryanair is again criticizing government bailouts for airlines it considers “biased” and “not transparent”, even when it had said that it did not want to receive any supplemental state aid in light of the Coronavirus pandemic. If the carrier had been open to subsidies, it could perhaps have maintained a competitive market share where Lufthansa is concerned, and still be able to have a sustainable workforce and fleet when air travel demand returns to pre-pandemic levels. Meanwhile, Lufthansa's Supervisory Board is of a contrary opinion: that the stabilization package offered by the German Economic Stabilization Fund remains the only viable option to retaining operational solvency.

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