Lufthansa bailout still has to clear EU hurdles

02:05

The German government has agreed to a bailout package worth $9.8 billion dollars for Lufthansa, Europe's biggest airline.

But the deal requires approval from the European Commission, which could seek to impose its own conditions amid complaints from other European carriers.

As part of the agreement, the German government will take a 20 percent stake in Lufthansa, which could increase to 25 percent in order to protect it from a hostile takeover bid.

"A total of nine billion euros will be made available to the airline and its 135,000 employees to help the company get through the difficult times we are all now facing," said Germany's finance minister, Olaf Scholz.

Germany's economy minister, Peter Altmaier, briefs the media on the 'stabilization package' for Lufthansa, which could be challenged by competitors. /Markus Schreiber /Pool/AFP

Irish carrier Ryanair says it will contest what it called "illegal state" aid that "distorts competition." There is speculation that the commission may force Lufthansa to give up some take-off and landing slots to reduce unfair competition.

"If Lufthansa actually has to surrender slots, this could have a negative impact on the flexibility of Lufthansa to re-establish central flight connections from its Frankfurt and Munich hubs," said Elmar Giemulla, professor of aviation law at the Berlin University of Technology.

Lufthansa says it is losing more than $1 million an hour, with most flights grounded due to the coronavirus pandemic. But the German carrier hopes to reopen many holiday travel routes in June as the spread of the virus on the continent is slowing.

Airplanes of the German airline Lufthansa parked at the "Franz-Josef-Strauss" airport in Munich, southern Germany. Christof Stache / AFP

German government support for Lufthansa was never really in doubt, given its strategic importance. However, Berlin has said it won't exercise its voting rights in day-to-day operations, which is seen as a win for the airline.

The German government stressed it wants to sell its shares by 2023 at what it hopes will be a small profit.

"The commitment we are preparing here is one for the time being," Scholz said. "When the company is afloat again, the state will sell its shares."

With the German government now even more involved, it's likely to push back hard in Brussels as it tries to help Lufthansa take off.