Lufthansa (LHAB) (LHA) and the German government reached an agreement on a €9 billion rescue plan. The state would acquire 20% of the capital of the airline giant, thus becoming its main shareholder. But to ensure fair competition, the European Commission might come after some of Lufthansa’s (LHAB) (LHA) most prized assets.

Through the German federal government's economic stability fund (WSF), the state will reenter the capital of the company, 20 years after its divestment. It will acquire 20% of the group for €300 million and inject a further €5.7 billion as silent participations in the assets of Lufthansa (LHAB) (LHA) . 

A three-year loan of €3 billion guaranteed by the state will be granted to the German group. In exchange, it will be prohibited from paying dividends to its shareholders. The WSF will sell back all of its shares at market price in 2023, if the group repays the injected funds.

The agreement is the result of weeks of intense negotiations, as Lufthansa (LHAB) (LHA) was initially quite reluctant to see the German state take participation in its capital. The German airline group even considered entering insolvency proceedings instead.

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But the rescue package has yet to be approved by shareholders, as well as the European Commission. And according to Bloomberg, that might prove challenging.

The European Competition Authority reportedly expects Lufthansa (LHAB) (LHA) to surrender slots in Frankfurt and Munich. Additionally, it would have to decrease the number of aircraft based in Germany. 

Both measures would open the German market to competitors, thus ensuring the state aid would not give the carrier an unfair advantage. “This is important to preserve the level playing field in the single market post-coronavirus crisis to the benefit of all European consumers and companies,” the European Commission defended. But the German Chancellor Angela Merkel is not ready to see Lufthansa (LHAB) (LHA) lose the key slots, and would “fight” for them, sources say.

On May 4, 2020, the European Commission approved the €7 billion state aid proposed by the French government to Air France-KLM. 

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