On Thursday 25 June, under the Covid-19-related Temporary Framework on State aid, the European Commission approved Germany's plan to contribute €6 billion to recapitalising Deutsche Lufthansa AG (DLH), the Lufthansa Group’s parent company.
The recapitalisation measure is part of a wider support package which also includes a state guarantee on a €3 billion loan that Germany intends to grant to DLH as individual aid under the German scheme approved by the Commission's decision of 22 March 2020.
Margrethe Vestager, the Executive Vice-President responsible for competition policy, stressed that the support comes with conditions. “Lufthansa has committed to making available slots and additional assets at its Frankfurt and Munich hub airports, where Lufthansa has significant market power. This gives competing carriers the chance to enter those markets”.
The German plan incorporates three components: - €300 million equity participation through the subscription of new shares by the State, corresponding to 20% of DLH's share capital; - €4.7 billion silent participation with the features of a non-convertible equity instrument; and - €1 billion silent participation with the features of a convertible debt instrument.
Germany submitted a business plan drawn up by DLH to repay both the loan and the recapitalisation instruments by 2026. Germany also committed to working out a credible exit strategy within 12 months of the aid being granted, unless the State’s involvement is reduced to below 25% of equity by that time. If, six years after the recapitalisation aid has been granted, there are doubts about the withdrawal of the State, the Commission will be provided with a restructuring plan for DLH.
Governance. Until the State has fully withdrawn from providing capital, DLH will be subject to a ban on paying dividends and buying back shares. Furthermore, until at least 75% of the recapitalisation has been paid back, strict limits will be applied to management remuneration, including a ban on bonus payments.
No cross-subsidies. DLH will be prohibited from using the aid to support the economic activities of consolidated companies that were in financial difficulties prior to 31 December 2019. In addition, until at least 75% of the recapitalisation has been repaid, DLH will be prevented from acquiring a stake more than 10% in its competitors or other operators in the same business sector.
Lastly, DLH will be required to surrender up to 24 slots per day at Frankfurt and Munich hub airports to allow competing carriers to base a maximum of four aircraft at each of these airports. (Original version in French by Lionel Changeur)