leghorn wrote:

mxaxai wrote:

I guess this is mostly a warning shot at the EU that LH can still decide whether any terms & conditions of the bailout are acceptable or not. If the conditions are too harsh, they have the option to decline and try to ride this out on their own.

I'm not seeing how you are spinning this. I'm reminded of the scene in Blazing Saddles where the black Sheriff holds the gun to his own head warning the people who want to shoot him that he'll shoot himself if they don't back off.

It's more like a person sitting on a nuke in central NYC, threatening to pull the trigger if their demands aren't met. Yes they will suffer too, but imagine how easily you could avoid all the collateral damage if only you accepted their tiny, absolutely reasonable request of a few billion dollars.

blueflyer wrote:

fraT wrote:

[As per German media, the decision has only been postponed since nobody know whether and what limitations the EU will ask for.

Doesn't the EU typically work the other way around? Meaning the parties present the competition commission an agreed upon deal on which the EU issues its conclusions? I may be wrong, but I don't think the commission deals in hypotheticals (i.e. if the terms are this we want that remedy). I think the normal path forward is for the board to agree to the deal, with walk-away clauses in case they do not accept the competition commission's proposed remedies, but "normal" doesn't exactly describe our current environment either.

Correct.
The EU can only make a judgement once an agreement is put on their desk showing the extent of the state aid.

It's most likely that LH already sent an agreement and the EU said something that made LH go Eeeeeewwww.
I think that there is more than just slots at FRA and MUC involved.
I wonder though, because the EU has been very kind with LH in the past.

Basically, they now have to discuss whether to go ahead with the bailout plan, negotiate another plan or find other sources of liquidity.

People are already protesting the deal in Germany: https://www.bz-berlin.de/liveticker/pro ... sa-rettung

Jetty wrote:

The EU should definitely attach strings to this enormous government support. Breaking up LH-group might be appropriate. LX and OS together and with their governments support can go their own way. That way LH and Germany get a very clear message that they aren’t exempt from EU regulations. Many people in Europe have enough from Merkel & co’s exceptionalism and she needs to be taught a lesson.

And exactly what would that "exceptionalism" be?

Flying-Tiger wrote:

Jetty wrote:

The EU should definitely attach strings to this enormous government support. Breaking up LH-group might be appropriate. LX and OS together and with their governments support can go their own way. That way LH and Germany get a very clear message that they aren’t exempt from EU regulations. Many people in Europe have enough from Merkel & co’s exceptionalism and she needs to be taught a lesson.

What strings were attached to AFKL´s 7+ bn EUR package? Air France & KLM & Transavia claim a market share of 77% for domestic flying in France, Lufthansa claims a market share of 80% for is home markets Germany, Austria and Switzerland. That´s a negligable difference in market shares and would call for a equal-for-equal treatment. Means breaking up AFKL or at least force them to sell Transavia.

IAG´s purchase of Air Europe will lead IAG to have a market share within Spain of in the same magnitude as all three major airlines (Iberia, Vueling, Air Europe) will be under one control.

If market share is your concern you´ve to argue that AFKL needs to release control of Transavia and IAG is not allowed to purchase Air Europe.

As both won´t happen there is no reason to attach such a string (or release of slots or anything else) towards a Lufthansa package. Can´t cry for a level playing field and have others pass unharm.

The difference is the kind of support. The EU eyes any form of re-nationalisation (full or partial) as undesirable. AF/KL get loans while LH will be 20% government owned. AF/KL have to make serious concessions on domestic routes on environmental grounds, LH has to "renew its fleet" as its contribution to a better environmental record.

Carsten Spohr told staff in a videoconference Lufthansa will run out of cash in July and may not be able to pay salaries in June,without a quick agreement on an aid package, as it may take as many as four weeks for the funds to reach the carrier.
https://trends.levif.be/economie/politi ... 93565.html
Among other nuggets:
-Giving up slots in FRA and MUC is out of the question;
-Lufthansa is selling aircraft to try and raise cash (no details, however I presume it would be sale-and-lease-back type of deals);
-The German aid package must be finalized before concluding negotiations with foreign government over foreign subsidiaries (Austrian, etc.);
-"Visiting Ben, Vienna, and Brussels to beg for funds on behalf of a proud company like Lufthansa is humiliating." but necessary

I'm hoping that last sentence is somewhat distorted by the translation (presumably from German to French as the article is in French) or taken out of context. I would have understood "sobering" however if he is humiliated to thread the same path that all airline CEOs around the world have followed or are contemplating following, he needs to swallow his pride, or find himself a new job.

How come are they running out of cash that soon? I thought they could last much longer?

Westerwaelder wrote:

The difference is the kind of support. The EU eyes any form of re-nationalisation (full or partial) as undesirable. AF/KL get loans while LH will be 20% government owned. AF/KL have to make serious concessions on domestic routes on environmental grounds, LH has to "renew its fleet" as its contribution to a better environmental record.

FWIW, AF/KL is also in part owned by the French and Dutch governments, and for more than 'just' 20% too, btw.
In fact, the Dutch government bought into the group only last year: what condititions did the EU attach to that purchase in 2018?
None as far as I know?

In The Netherlands, AMS is even artificially reducing the number of movements allowed in order to protect KLM from new competition as it needs to reduce its number of flights due to the economic downturn, because AMS understand very well you can't run a mega-hub from a midsized city when you do not have a huge feeding network in place, yet the only way to make a success of such a feeding network is by having market control at your hub. If there's too much competition on regional routes, the feeding network becomes highly unprofitable and consumes all the profit you make on the longhaul flights, so you have to cut back frequencies and capacity and your hub slowly falls apart to the advantage of others like TK

The EC's obsession with seeing as much competition as possible INside the EU makes EU companies weaker whenever they compete OUTside of the EU: I thought one of the lessons learnt from Corona was that we shouldn't have our economy rely on things which are not under our own control, be it medical supplies, raw materials or indeed transportation?

sabenapilot wrote:

Westerwaelder wrote:

The difference is the kind of support. The EU eyes any form of re-nationalisation (full or partial) as undesirable. AF/KL get loans while LH will be 20% government owned. AF/KL have to make serious concessions on domestic routes on environmental grounds, LH has to "renew its fleet" as its contribution to a better environmental record.

FWIW, AF/KL is also in part owned by the French and Dutch governments, and for more than 'just' 20% too, btw.
In fact, the Dutch government bought into the group only last year: what condititions did the EU attach to that purchase in 2018?
None as far as I know?

In The Netherlands, AMS is even artificially reducing the number of movements allowed in order to protect KLM from new competition as it needs to reduce its number of flights due to the economic downturn, because AMS understand very well you can't run a mega-hub from a midsized city when you do not have a huge feeding network in place, yet the only way to make a success of such a feeding network is by having market control at your hub. If there's too much competition on regional routes, the feeding network becomes highly unprofitable and consumes all the profit you make on the longhaul flights, so you have to cut back frequencies and capacity and your hub slowly falls apart to the advantage of others like TK

The EC's obsession with seeing as much competition as possible INside the EU makes EU companies weaker whenever they compete OUTside of the EU: I thought one of the lessons learnt from Corona was that we shouldn't have our economy rely on things which are not under our own control, be it medical supplies, raw materials or indeed transportation?

France and The Netherlands both own 14%. You can’t simply say “that’s more than 20%”.

It looks like Lufthansa is worried about the potential condition to give up slots in Frankfurt and Munich. Was Munich at it's capacity limit so that other airlines weren't able to get slots? Or is it a percentage slot reduction rather than an absolute number? Surly the issue will be fill slots rather than having slots for the foresee able time.

Waterbomber2 wrote:

blueflyer wrote:

fraT wrote:

[As per German media, the decision has only been postponed since nobody know whether and what limitations the EU will ask for.

Doesn't the EU typically work the other way around? Meaning the parties present the competition commission an agreed upon deal on which the EU issues its conclusions? I may be wrong, but I don't think the commission deals in hypotheticals (i.e. if the terms are this we want that remedy). I think the normal path forward is for the board to agree to the deal, with walk-away clauses in case they do not accept the competition commission's proposed remedies, but "normal" doesn't exactly describe our current environment either.

Correct.
The EU can only make a judgement once an agreement is put on their desk showing the extent of the state aid.

It's most likely that LH already sent an agreement and the EU said something that made LH go Eeeeeewwww.
I think that there is more than just slots at FRA and MUC involved.
I wonder though, because the EU has been very kind with LH in the past.

Basically, they now have to discuss whether to go ahead with the bailout plan, negotiate another plan or find other sources of liquidity.

Thank you for clarifying how the competition commission works.

This confirms my suspicion that LH management's so called 'delay' is the same as a rejection.

Unless folks here know more doesn’t the original article state that not all EU conditions are clear yet and that’s why they postponed?

marcelh wrote:

sabenapilot wrote:

Westerwaelder wrote:

The difference is the kind of support. The EU eyes any form of re-nationalisation (full or partial) as undesirable. AF/KL get loans while LH will be 20% government owned. AF/KL have to make serious concessions on domestic routes on environmental grounds, LH has to "renew its fleet" as its contribution to a better environmental record.

FWIW, AF/KL is also in part owned by the French and Dutch governments, and for more than 'just' 20% too, btw.
In fact, the Dutch government bought into the group only last year: what condititions did the EU attach to that purchase in 2018?
None as far as I know?

In The Netherlands, AMS is even artificially reducing the number of movements allowed in order to protect KLM from new competition as it needs to reduce its number of flights due to the economic downturn, because AMS understand very well you can't run a mega-hub from a midsized city when you do not have a huge feeding network in place, yet the only way to make a success of such a feeding network is by having market control at your hub. If there's too much competition on regional routes, the feeding network becomes highly unprofitable and consumes all the profit you make on the longhaul flights, so you have to cut back frequencies and capacity and your hub slowly falls apart to the advantage of others like TK

The EC's obsession with seeing as much competition as possible INside the EU makes EU companies weaker whenever they compete OUTside of the EU: I thought one of the lessons learnt from Corona was that we shouldn't have our economy rely on things which are not under our own control, be it medical supplies, raw materials or indeed transportation?

France and The Netherlands both own 14%. You can’t simply say “that’s more than 20%”.

No. France and The Netherlands each own 14%, not both. (Actually, France's shareholding is 14.3%). 'each' and 'both' are not interchangeable. That means the total of AFKL owned by governments is 28.3%, so sabenapilot's point is actually correct.

Jetty wrote:

The EU should definitely attach strings to this enormous government support. Breaking up LH-group might be appropriate. LX and OS together and with their governments support can go their own way. That way LH and Germany get a very clear message that they aren’t exempt from EU regulations. Many people in Europe have enough from Merkel & co’s exceptionalism and she needs to be taught a lesson.

What rubbish. You sound like a reporter from the Daily Mail in the UK. The EU already agreed that individual Nations can support their Companies in these unprecedented times. If you want to criticize anyone, how about the italian Government that actually illegally supported Alitalia over the last god knws how many years.

By the way, I am an ex Air Berlin employee and have no great love of Lufthansa, but even I understand it's a different ball game at the moment. Oh, and the Money Lufthansa get, will be paid back. they aren't just being given it as a freebie.

vhtje wrote:

marcelh wrote:

sabenapilot wrote:

FWIW, AF/KL is also in part owned by the French and Dutch governments, and for more than 'just' 20% too, btw.
In fact, the Dutch government bought into the group only last year: what condititions did the EU attach to that purchase in 2018?
None as far as I know?

In The Netherlands, AMS is even artificially reducing the number of movements allowed in order to protect KLM from new competition as it needs to reduce its number of flights due to the economic downturn, because AMS understand very well you can't run a mega-hub from a midsized city when you do not have a huge feeding network in place, yet the only way to make a success of such a feeding network is by having market control at your hub. If there's too much competition on regional routes, the feeding network becomes highly unprofitable and consumes all the profit you make on the longhaul flights, so you have to cut back frequencies and capacity and your hub slowly falls apart to the advantage of others like TK

The EC's obsession with seeing as much competition as possible INside the EU makes EU companies weaker whenever they compete OUTside of the EU: I thought one of the lessons learnt from Corona was that we shouldn't have our economy rely on things which are not under our own control, be it medical supplies, raw materials or indeed transportation?

France and The Netherlands both own 14%. You can’t simply say “that’s more than 20%”.

No. France and The Netherlands each own 14%, not both. (Actually, France's shareholding is 14.3%). 'each' and 'both' are not interchangeable. That means the total of AFKL owned by governments is 28.3%, so sabenapilot's point is actually correct.

It's still apples and oranges. France and the Netherlands did not acquire their stakes in return for state aid. If they were increasing their stake as part of the several billions they are making available now, we could compare the situation.

sabenapilot wrote:

FWIW, AF/KL is also in part owned by the French and Dutch governments, and for more than 'just' 20% too, btw.
In fact, the Dutch government bought into the group only last year: what condititions did the EU attach to that purchase in 2018?
None as far as I know?

The Dutch government bought the shares in secret on the open market. That’s very different than what Merkel & co are doing by handing out billions to directly to LH.

LTU330 wrote:

Jetty wrote:

The EU should definitely attach strings to this enormous government support. Breaking up LH-group might be appropriate. LX and OS together and with their governments support can go their own way. That way LH and Germany get a very clear message that they aren’t exempt from EU regulations. Many people in Europe have enough from Merkel & co’s exceptionalism and she needs to be taught a lesson.

What rubbish. You sound like a reporter from the Daily Mail in the UK. The EU already agreed that individual Nations can support their Companies in these unprecedented times. If you want to criticize anyone, how about the italian Government that actually illegally supported Alitalia over the last god knws how many years.

Did Alitalia buy European airlines left and right in the last decade? There lies the difference. Alitalia has always been a basket case, but Lufthansa first reduced competition by acquiring many other airlines and then is in need of the largest state aid out of all European airlines. That’s plain unacceptable.

By the way, I am an ex Air Berlin employee and have no great love of Lufthansa, but even I understand it's a different ball game at the moment. Oh, and the Money Lufthansa get, will be paid back. they aren't just being given it as a freebie.

The loan will have to be paid back supposedly, there’s no such stipulation about the billions payed for a share in the company.

The shares will be sold by the government. It was formally announced that they do not want to keep them.

Jetty wrote:

LTU330 wrote:

Jetty wrote:

The EU should definitely attach strings to this enormous government support. Breaking up LH-group might be appropriate. LX and OS together and with their governments support can go their own way. That way LH and Germany get a very clear message that they aren’t exempt from EU regulations. Many people in Europe have enough from Merkel & co’s exceptionalism and she needs to be taught a lesson.

What rubbish. You sound like a reporter from the Daily Mail in the UK. The EU already agreed that individual Nations can support their Companies in these unprecedented times. If you want to criticize anyone, how about the italian Government that actually illegally supported Alitalia over the last god knws how many years.

Did Alitalia buy European airlines left and right in the last decade? There lies the difference. Alitalia has always been a basket case, but Lufthansa first reduced competition by acquiring many other airlines and then is in need of the largest state aid out of all European airlines. That’s plain unacceptable.

By the way, I am an ex Air Berlin employee and have no great love of Lufthansa, but even I understand it's a different ball game at the moment. Oh, and the Money Lufthansa get, will be paid back. they aren't just being given it as a freebie.

The loan will have to be paid back supposedly, there’s no such stipulation about the billions payed for a share in the company.

On of the conditions (apparently) raised is that Lufthansa releases sufficient slots for two competitors in Frankfurt and one competitor in Munich to establish basis with each four to six planes, coming from Lufthansa´s own stock... Haven´t seen any mentioning if this goes for long-haul or short-haul, however it doesn´t matter. Such a move will kill off you local hub function and makes it even harder to repay the govenment aid in question, which goes against the whole idea of a support package.

Sounds a bit like some horror drama? Is there any source for this claim?

Westerwaelder wrote:

vhtje wrote:

marcelh wrote:

France and The Netherlands both own 14%. You can’t simply say “that’s more than 20%”.

No. France and The Netherlands each own 14%, not both. (Actually, France's shareholding is 14.3%). 'each' and 'both' are not interchangeable. That means the total of AFKL owned by governments is 28.3%, so sabenapilot's point is actually correct.

It's still apples and oranges. France and the Netherlands did not acquire their stakes in return for state aid. If they were increasing their stake as part of the several billions they are making available now, we could compare the situation.

Careful, the Dutch government stake only came into being in 2018, for the sole reason of gaining strategic control over AF/KL...
Not exactly a normal equity investment, nor something grown historically.
If the EC has an objection against state participation in companies, it should have stepped in right then too.
If not, then it shouldn't bother about Germany buying into LH now and should just focus on the terms of the portion of the cash injection structured as a loan.
But what it can not is object to one government holding shares, while it doesn't to another one.

Jetty wrote:

The Dutch government bought the shares in secret on the open market. That’s very different than what Merkel & co are doing by handing out billions to directly to LH.

Buying exisiting shares on the stock market doesn't constitute moral hasard for existing shareholders; buying newly issued ones does as it dilutes the current shareholdership, so I'd argue the second way is actually far more acceptable than the first given the situation at hand.
Besides, Germany has structured the deal in such a way that it is obvious they want to exit Lufthansa again in the near future: I very much doubt the Dutch or French state are going to sell their shares in AF/KL anytime soon?

Jetty wrote:

Did Alitalia buy European airlines left and right in the last decade? There lies the difference. Alitalia has always been a basket case, but Lufthansa first reduced competition by acquiring many other airlines and then is in need of the largest state aid out of all European airlines. That’s plain unacceptable.

It's not like Lufthansa bought others with government money did they? They paid it all with their own money earnt.
Besides, AF/KL will get a combined loan of up to 11BN, about twice as much as what Lufthansa will get as a loan.
Yet I didn't see the EC ask AF or KLM to give up slots at AMS for instance, despite this airport being capacity restricted?
As said, the Dutch are even going to artificially limit the max number of movements allowed at AMS for the next few years to make sure that de cut back of KLM does not suddenly create a void that can be filled by a competitor?!
How's that for competition distortion?

I'm sorry, but it seems to me the EC sees all of this as a unique situation to force a company which under normal conditions would never have been involved in remedial procedures to give up a very strong hold on its home market which it has accrued through normal commercial activities of theirs, with the sole aim of stimulating the short haul competition within Europe, even if this will most certainly weaken intercontinental competitiveness of a major European airline, likely to the benefit of non-European airlines like TK, SU, EK etc!
I have a feeling the German government is quite surprised by the demands too and is working with Lufthansa to reduce/remove them or will restructure the deal in another way so no more remedial procedure is needed.

Another thing: at some point the costs of going to the private market might be lower than all of this.
LH could issue extra shares to private investors and/or take a commercial loan (from a government bank or a public vehicle) at market rates too: it might not have looked very attractive or even possible at the end of March / early April, but now that normality is slowly coming back to the European economy and with stock markets is recovering on the back of a return of investors confidence, it could be an option now.

Noshow wrote:

Sounds a bit like some horror drama? Is there any source for this claim?

Yes. https://www.handelsblatt.com/unternehmen/handel-konsumgueter/luftfahrt-warum-die-rettung-der-lufthansa-ins-stocken-geraet/25868350.html?ticket=ST-4369167-zkYelhqkx1veQjhR0evM-ap3

Frankfurt, Berlin Es ist ein Poker mit ungewissem Ausgang. Auf einen „harten Kampf“ hatte am Montag Bundeskanzlerin Angela Merkel (CDU) das Präsidium ihrer Partei eingeschworen. Und sie sollte recht behalten. So will die EU-Kommission der Lufthansa nichts weniger als das Herzstück ihres Geschäfts nehmen: 20 Slots, Start- und Landerechte an den wichtigsten Drehkreuzen Frankfurt und München.

Lufthansa soll die Verkehrsrechte abgeben, damit Rivalen zwei Basen in Frankfurt und eine am Flughafen München errichten können – jeweils ausgestattet mit vier bis sechs Flugzeugen, die Lufthansa ebenfalls stellen soll.

Nach Informationen aus verhandlungsnahen Kreisen hat das Management die zu erwartenden Einbußen durchkalkuliert. Das Ergebnis: Es würde ein Umsatz von 1,2 Milliarden Euro verloren gehen. Und damit auch die entsprechende Liquidität.

Flying-Tiger wrote:

On of the conditions (apparently) raised is that Lufthansa releases sufficient slots for two competitors in Frankfurt and one competitor in Munich to establish basis with each four to six planes, coming from Lufthansa´s own stock... Haven´t seen any mentioning if this goes for long-haul or short-haul, however it doesn´t matter. Such a move will kill off you local hub function and makes it even harder to repay the govenment aid in question, which goes against the whole idea of a support package.

What I have seen posted is that they'd have to give up sufficient slots at both FRA and MUC to make it possible for at least 2 competitors to operate with a total of 20 based planes there?!
In short, Lufthansa would have to allow turning FRA and MUC in yet another a VIE or BRU: we all know how well you can support an intercontinental hub from a mid-sized European city if your feeding routes are directly attacked by the likes of Wizzair and/or ryanair from within..
FRA or MUC are no Paris or London which can support longhaul flights to pretty much everywhere with O&D traffic alone: the EC might just as well ask that Lufthansa in Germany is split into 2 or even 3 companies then, just to give you an idea of the amplitute of their demand.
German government apparently rejects the demand too, because it is completely disproportional.

vhtje wrote:

No. France and The Netherlands each own 14%, not both. (Actually, France's shareholding is 14.3%). 'each' and 'both' are not interchangeable. That means the total of AFKL owned by governments is 28.3%, so sabenapilot's point is actually correct.

It does make a difference if one entity get 20% (against a very big discount) + convertible bond which take it to a controlling stake of 25% or have 14 - 15% each and nothing to say. Implying that both are identical and that the EU Commission should have requested conditions in the AF/KL case is not correct. However, it did make it easier for AF and KL to get aid as both have shareholders which have an incentive to provide such aid. However, at the same time they wisely decided to avoid scrutiny by the EU by giving loans and loans guarantees only. The Germans could have done the same thing, but wanted a share of the company, of which would attract more attention from the EU.

Flying-Tiger wrote:

On of the conditions (apparently) raised is that Lufthansa releases sufficient slots for two competitors in Frankfurt and one competitor in Munich to establish basis with each four to six planes, coming from Lufthansa´s own stock... Haven´t seen any mentioning if this goes for long-haul or short-haul, however it doesn´t matter. Such a move will kill off you local hub function and makes it even harder to repay the govenment aid in question, which goes against the whole idea of a support package.

this wouldn't be a problem if the German government wouldn't been able to control traffic at MUC and FRA. The Dutch would control the capacity at AMS and as owners of AMS decide who they want to see at their airport.

LJ wrote:

vhtje wrote:

No. France and The Netherlands each own 14%, not both. (Actually, France's shareholding is 14.3%). 'each' and 'both' are not interchangeable. That means the total of AFKL owned by governments is 28.3%, so sabenapilot's point is actually correct.

It does make a difference if one entity get 20% (against a very big discount) + convertible bond which take it to a controlling stake of 25% or have 14 - 15% each and nothing to say. Implying that both are identical and that the EU Commission should have requested conditions in the AF/K case is not correct. However, it did make it easier for AF and KL to get aid as both have shareholders which have an incentive to provide such air. However, at the same time they wisely decided to avoid scrutiny by the EU by giving loans and loans guarantees only. The Germans could have done the same thing, but wanted a share of the company, of which would attract more attention from the EU.

No case is ever the same, but the outcome is pretty much the same: a company, with a significant portion of its shares held by the government(s), being provided with a loan by that government.... the sequence in which it happens is really of no importance to the effect it has on the market in future, does it?

I'm actually not so sure it's Germany's buying shares of LH which is attracting all the scrutiny; I would think it's rather them providing the liquidity, to check if this is done on acceptable conditions? As such, I'm still amazed by the speed at which the AF/KL deal got approved by the EC, especially as it amounts to far more money than this one????

Anyway, if the concessions by the EC are indeed what they are said to be, then they are disproportional to those asked from others recently and definitely not in relation to the request itself, but rather the status of the requester. Not exactly proof of impartiality by the EC: are they now overcompensating for what they perceive as 'errors' made by them in the past, when they were said to have been too soft of Lufthansa?

sabenapilot wrote:

Flying-Tiger wrote:

On of the conditions (apparently) raised is that Lufthansa releases sufficient slots for two competitors in Frankfurt and one competitor in Munich to establish basis with each four to six planes, coming from Lufthansa´s own stock... Haven´t seen any mentioning if this goes for long-haul or short-haul, however it doesn´t matter. Such a move will kill off you local hub function and makes it even harder to repay the govenment aid in question, which goes against the whole idea of a support package.

What I have seen posted is that they'd have to give up sufficient slots at both FRA and MUC to make it possible for at least 2 competitors to operate with a total of 20 based planes there?!
In short, Lufthansa would have to allow turning FRA and MUC in yet another a VIE or BRU: we all know how well you can support an intercontinental hub from a mid-sized European city if your feeding routes are directly attacked by the likes of Wizzair and/or ryanair from within..
FRA or MUC are no Paris or London which can support longhaul flights to pretty much everywhere with O&D traffic alone: the EC might just as well ask that Lufthansa in Germany is split into 2 or even 3 companies then, just to give you an idea of the amplitute of their demand.
German government apparently rejects the demand too, because it is completely disproportional.

AMS has most international transfer traffic of all European airports yet EasyJet is it’s 2nd largest user. So your hypotheses doesn’t hold up.

sabenapilot wrote:

It's not like Lufthansa bought others with government money did they? They paid it all with their own money earnt.
Besides, AF/KL will get a combined loan of up to 11BN, about twice as much as what Lufthansa will get as a loan.

That’s not a valid comparison. The numbers are wrong as LH will get way more than 6BN. And you have to either compare AF/KL with the LH-group or AF and KL with the separate airlines of LH-group. LH is still talking with the Belgian and Austrian governments and already got a huge amount of money from the Swiss government. Thus in every comparison LH gets more money while they were the airline aggressively expanding over the last decade, not AF/KL.

Jetty wrote:

AMS has most international transfer traffic of all European airports yet EasyJet is it’s 2nd largest user. So your hypotheses doesn’t hold up.

The Dutch market has no domestic flying whatsoever, so implying it sees less O&D traffic than for instance FRA based purely on that statistic is not correct IMHO.
Both airports can only see their home carrier support a huge intercontinental network by attracting tons of passengers from surrounding cities in Europe through loads of feeding flights and ideally you don't have too much competition on them, because you need whatever O&D traffic on those routes to make up the cost of 'giving away' the feeder flight to your intercontinental transfer passenger.

Easyjet is no wizzair or Ryanair: their CASK is much higher and it's far easier to compete against them.

Besides, would KLM be jumping of joy if the EC would ask them in return for approval of the loan by the Dutch government to give up say 'just' 10 planes and the corresponding slots to allow a competitor to establish a new base at AMS, next to Easyjet... say wizzair or ryanair? I doubt it...

Where does Condor stand in all this? Are they considered a viable competitor to LH at FRA/MUC, now that LH is planning to let its agreement with them expire?

Jetty wrote:

That’s not a valid comparison. The numbers are wrong as LH will get way more than 6BN. And you have to either compare AF/KL with the LH-group or AF and KL with the separate airlines of LH-group. LH is still talking with the Belgian and Austrian governments and already got a huge amount of money from the Swiss government.

That's a valid point indeed!
In Belgium we're talking about 290M, in Austria it's 767M if I am correct? Switzerland already agreed to 1.1BN
Ad all that to the loan Lufthansa discussed with the WSF in Germany of the 5.7BN: a total of 7.9BN in loans.
AF + KL is at 7BN (from France) + 2BN to 4BN (from The Netherlands), all in loans.

Jetty wrote:

Thus in every comparison LH gets more money while they were the airline aggressively expanding over the last decade, not AF/KL.

The conclusion that they get more money is not correct IMHO (see above)

The fact they have expanded over the last decade can not automatically be seen as something bad: I thought that was the essence of doing business successfully? Is Ryanair or Easyjet a bad business, just because they expanded agressively too?

I have the impression the EC is (mis)using the current situation to downsize a company which became just too successful, albeit by using market mechanisms only.
Not saying the EC should or should not be doing this as that is a political matter for them to decide on, but then they have to follow the correct procedures for this kind of action normally reserved to mergers and take-overs, not by using a creative reading of the remedial procedures to public loans as we see employed here differently than in similar cases only recently.

And with that I'm out for now..; none of my business anyway, other than that it does look weird indeed and I'd be very surprised to see Germany accepting such unique conditions being put on this deal, as it has massive implications for similar deals still to come in other sectors of the economy which will need stabilization due to the Corona crisis!

sabenapilot wrote:

No case is ever the same, but the outcome is pretty much the same: a company, with a significant portion of its shares held by the government(s), being provided with a loan by that government.... the sequence in which it happens is really of no importance to the effect it has on the market in future, does it?

Actually it does. The AF share is already a reduction from the past. The investment by the Dutch government didn't help AF/KL, it helped the shareholders of AF/KL. As such AF/Kl wasn't helped. The LH bail out is a capital restructuring and as such helps LH.

sabenapilot wrote:

I'm actually not so sure it's Germany's buying shares of LH which is attracting all the scrutiny; I would think it's rather them providing the liquidity, to check if this is done on acceptable conditions? As such, I'm still amazed by the speed at which the AF/KL deal got approved by the EC, especially as it amounts to far more money than this one????

It's not that strange as the rate against AF borrows is market conform (at least if what I've heard is correct). The EU cannot attach additional requirements as it seems legally within the framework the EU uses (we'll see the exact reasoning when the EU releases its verdict in a few days time). Moreover, the majority of the aid are loan guarantees whereby commercial banks loan money to AF. Only a minority of the aid is a government loan (3bn out of 7bn) and you get what the EU actually wants to see, a bail out whereby the market has an important role. The aid to KLM will follow the same path as the aid to AF, thus it's expected to be approved by the EU without additional conditions.

However, a capital restructuring whereby a central government can gain a blocking minority over a large airline will raise questions in Brussels. Add to this a 3bn loan from a public sector entity (which is de facto the German State) and you've something the EU doesn't want to see. To be honest, it's cheaper for LH do it this way, but don't be surprised if the EU suddenly comes with additional requirements (of which we all know will be less severe than the rumored initial requirement of 72 daily slots lost permanently).

BTW the aid package of AF/KL will be max EUR 2bn higher (it can even be identical), thus it's not "far more" than the LH bail out.

LJ wrote:

It's not that strange as the rate against AF borrows is market conform (at least if what I've heard is correct). The EU cannot attach additional requirements as it seems legally within the framework the EU uses (we'll see the exact reasoning when the EU releases its verdict in a few days time). Moreover, the majority of the aid are loan guarantees whereby commercial banks loan money to AF. Only a minority of the aid is a government loan (3bn out of 7bn) and you get what the EU actually wants to see, a bail out whereby the market has an important role.

You are aware who owns those French banks which will provide AF with all the required money, do you?
It's hard to bypass the government in a country where even a dairy company or a perfume manufacturer is labelled strategic.

LJ wrote:

However, a capital restructuring whereby a central government can gain a blocking minority over a large airline will raise questions in Brussels. Add to this a 3bn loan from a public sector entity (which is de facto the German State) and you've something the EU doesn't want to see. To be honest, it's cheaper for LH do it this way, but don't be surprised if the EU suddenly comes with additional requirements (of which we all know will be less severe than the rumored initial requirement of 72 daily slots lost permanently).

The request for that blocking minority though an equity stake doesn't come from Lufthansa, it's the German government who requested it: I personally can see it go away again after this.
Alternatively I can also see LH seek private ways to fund their needs: they are no basket case by any means, so provided the Corona crisis stabilizes, they should be able to finance themselves on the market similar to AF/KL. Besides, it's not like the public loan offered to them is coming at such attractive rates, IMHO.
I was quite surprised to see they initially agreed to it: I think they may have overrreacted early April when the whole economy seemed like sinking through the floor and deemed public money the only way out for them, but is it still today? I genuinely doubt it...

LJ wrote:

BTW the aid package of AF/KL will be max EUR 2bn higher (it can even be identical), thus it's not "far more" than the LH bail out.

It's not far more indeed, yet it's not far less either like Jetty, said: it's roughly similar for roughly similar sized airline groups
Should thus be possible for them to structure their aid in an identical way as AF/KL and see similar (i.e. very soft) conditions attached to it: their balance sheet is better looking than that of AF/KL (for what that is still worth in the future of course), so if AF/KL can get it done, so can LH.

sabenapilot wrote:

Jetty wrote:

AMS has most international transfer traffic of all European airports yet EasyJet is it’s 2nd largest user. So your hypotheses doesn’t hold up.

The Dutch market has no domestic flying whatsoever, so implying it sees less O&D traffic than for instance FRA based purely on that statistic is not correct IMHO.
Both airports can only see their home carrier support a huge intercontinental network by attracting tons of passengers from surrounding cities in Europe through loads of feeding flights and ideally you don't have too much competition on them, because you need whatever O&D traffic on those routes to make up the cost of 'giving away' the feeder flight to your intercontinental transfer passenger.

Easyjet is no wizzair or Ryanair: their CASK is much higher and it's far easier to compete against them.

Besides, would KLM be jumping of joy if the EC would ask them in return for approval of the loan by the Dutch government to give up say 'just' 10 planes and the corresponding slots to allow a competitor to establish a new base at AMS, next to Easyjet... say wizzair or ryanair? I doubt it...

KLM had already given up some slots a few years ago when Norwegian wanted to start AMS-JFK, just because of the EU competition laws.

There is an element of intra-EU politics at play. German enterprises and the German economy at large have been among the most successful beneficiaries of EU integration. Partly out of a natural disposition against spendthriftness, but also partly to control competition, German governments have always been very wary of other governments spending to support their local champion. There is also a bit of lingering resentment in some corners of the EU institutions that the Greek debt bailout of which Germany was an active participant was a way to use EU members' funds to bail out German banks that were collectively and individually at risk in case of a Greek default.

All that to say that some within the EU may see this as an opportunity to "do unto Germany" and apply the same strict standards German governments would have pushed for in the past, while being more lenient for other countries.

LJ wrote:

To be honest, it's cheaper for LH do it this way, but don't be surprised if the EU suddenly comes with additional requirements (of which we all know will be less severe than the rumored initial requirement of 72 daily slots lost permanently).

Maybe the EU is doing France's bidding to force Lufthansa to scale down frequencies and instead upgauge on some of their trunk routes and.... save the A380.

Why would Lufthansa release slots at FRA for others to set up a base. The last time I checked FR set up a base there without a problem.

At least some further good news to the Lufthansa group operations in the coming weeks.

Please see link:

https://newsroom.lufthansagroup.com/eng ... cac0c05e5b

musapapaya wrote:

At least some further good news to the Lufthansa group operations in the coming weeks.

Please see link:

https://newsroom.lufthansagroup.com/eng ... cac0c05e5b

2000 weekly empty flights, you call that good news?

Then again if im wrong and they are successful at restarting, why would they need 9 bilions in state aid? To run competitors into the ground?

Waterbomber2 wrote:

musapapaya wrote:

At least some further good news to the Lufthansa group operations in the coming weeks.

Please see link:

https://newsroom.lufthansagroup.com/eng ... cac0c05e5b

2000 weekly empty flights, you call that good news?

Then again if im wrong and they are successful at restarting, why would they need 9 bilions in state aid? To run competitors into the ground?

The flights will not be full, but it is a difficult situation.

You have to have flights to attract passengers. But can't cancel flights if they are not full (enough).

So you start with routes you think/hope the most passengers turn up for and pray the numbers will increase.

You already have the costs for crew, planes, etc. If those flights brings enough money to cover the costs for that specific flight (fuel, airport fees, etc), you at least make some money (decreases the loss).

Waterbomber2 wrote:

musapapaya wrote:

At least some further good news to the Lufthansa group operations in the coming weeks.

Please see link:

https://newsroom.lufthansagroup.com/eng ... cac0c05e5b

2000 weekly empty flights, you call that good news?

Then again if im wrong and they are successful at restarting, why would they need 9 bilions in state aid? To run competitors into the ground?

Empty? Let’s see. So far I know 4 families that have booked flights for late June and early July within Europe today alone.

Reports right now: The EU commission is asking for LH to surrender 24 slots and 8 aircraft (in total) at FRA & MUC in exchange for government support. No idea whether they can choose any slots and aircraft (e. g. 8 A320 + 24 slots on Saturday afternoon) or somebody else gets to decide for them.

Will provide link once proper articles become available online.

Eikie wrote:

Waterbomber2 wrote:

musapapaya wrote:

At least some further good news to the Lufthansa group operations in the coming weeks.

Please see link:

https://newsroom.lufthansagroup.com/eng ... cac0c05e5b

2000 weekly empty flights, you call that good news?

Then again if im wrong and they are successful at restarting, why would they need 9 bilions in state aid? To run competitors into the ground?

The flights will not be full, but it is a difficult situation.

You have to have flights to attract passengers. But can't cancel flights if they are not full (enough).

So you start with routes you think/hope the most passengers turn up for and pray the numbers will increase.

You already have the costs for crew, planes, etc. If those flights brings enough money to cover the costs for that specific flight (fuel, airport fees, etc), you at least make some money (decreases the loss).

Exactly. Take Air Serbia as an example. They started flying on March 18 and the first 7 days loads were really bad. Then, all of a sudden, demand boomed and they ended up increasing frequencies in the first 14 days of June from 17 to 70!

mxaxai wrote:

Reports right now: The EU commission is asking for LH to surrender 24 slots and 8 aircraft (in total) at FRA & MUC in exchange for government support. No idea whether they can choose any slots and aircraft (e. g. 8 A320 + 24 slots on Saturday afternoon) or somebody else gets to decide for them.

Will provide link once proper articles become available online.

https://www.welt.de/regionales/hessen/a ... ungen.html [German]

The German government and the EU Commission agreed on a bailout deal today; a formal announcement is expected later this evening. LH is required to reduce their network by 4 aircraft and 12 slots at FRA and MUC each, for 8 aircraft / 24 slots total. This is halfway between the original demand of the EU for 20 aircraft and LH's offer for 3 aircraft. The EU justifies this size as the minimum viable size for a new competitor opening a base at FRA / MUC.

The EU may be playing a dangerous game here. Germany is the EU's largest economy. While the possibility of it happening is VERY VERY remote, if Germany gets fed up (as the UK did) and packs their bags, the EU will be in a world of hurt. It also looks like the EU is playing against the labor groups, which isn't smart in Europe. EU politicians claim to be on the side of the working people but their tactics will make airlines that pay less and foreign airlines stronger at the expense of a well-paying legacy carrier that serves its market quite well and allows Europe to punch above its weight on the world transportation scene. I'm usually not for government aid but this crisis is unprecedented. It also seems as if the EU competition authorities are picking and choosing here. Germany is being told that LH has basically has to weaken itself to receive aid but France can outright create a transportation monopoly by making AF completely stop competing with SNCF/TGV on certain routes. That strikes me as very anti-consumer illegal collusion. Where is the outrage from Brussels there? I guess if the environmentalists are happy, then they just turn a blind eye? I hope Germany and LH fight Brussels on this and use any tactics necessary to put these so-called competition authorities in their place.

AMALH747430 wrote:

The EU may be playing a dangerous game here. Germany is the EU's largest economy. While the possibility of it happening is VERY VERY remote, if Germany gets fed up (as the UK did) and packs their bags, the EU will be in a world of hurt. It also looks like the EU is playing against the labor groups, which isn't smart in Europe.

You assume that teh average German or German politicians care about LH. Moreover, Germany is already pleased with the stimulus package of which a large part will flow back to Germany either direct or iindirect.

AMALH747430 wrote:

but France can outright create a transportation monopoly by making AF completely stop competing with SNCF/TGV on certain routes. That strikes me as very anti-consumer illegal collusion. Where is the outrage from Brussels there?

It's not illegal collusion as another airline can always start flights. It;s not even anti-consumer as I doubt many fly point-to-point between those destinations where the ban is applicable (and flying connecting passengers is still allowed).

AMALH747430 wrote:

I hope Germany and LH fight Brussels on this and use any tactics necessary to put these so-called competition authorities in their place.

You do realise that the AF's aid package is already approved and that competition authorities have no jurisdiction over state aid? As long as the French government isn't blocking anyone flying French domestic flightsm tehre is no case.

AMALH747430 wrote:

It also seems as if the EU competition authorities are picking and choosing here.

Yes, they are picking and choosing but for good reason. LH has been buying airlines left and right and now needs the most money out of all airlines. Moreover their market dominance at FRA and MUC is much larger than that of other airlines at the other major European hubs. Very good that the EU now picks LH as airline that has to forcefully trim down a bit.

sabenapilot wrote:

LJ wrote:

It's not that strange as the rate against AF borrows is market conform (at least if what I've heard is correct). The EU cannot attach additional requirements as it seems legally within the framework the EU uses (we'll see the exact reasoning when the EU releases its verdict in a few days time). Moreover, the majority of the aid are loan guarantees whereby commercial banks loan money to AF. Only a minority of the aid is a government loan (3bn out of 7bn) and you get what the EU actually wants to see, a bail out whereby the market has an important role.

You are aware who owns those French banks which will provide AF with all the required money, do you?

To be honest, I haven't heard of any name in the syndicate which will arrange the loan, but I expect that CDC (or one of the other French guarantor schemes) will be the guarantor. The names I've heard lining up for KLM are all commercial banks.

Jetty wrote:

AMALH747430 wrote:

It also seems as if the EU competition authorities are picking and choosing here.

Yes, they are picking and choosing but for good reason. LH has been buying airlines left and right and now needs the most money out of all airlines. Moreover their market dominance at FRA and MUC is much larger than that of other airlines at the other major European hubs. Very good that the EU now picks LH as airline that has to forcefully trim down a bit.

"Trim down a bit." WOW! No, this is handicapping one company at the expense of others. Airlines work by having critical mass at hubs, take that away, and the business case goes with it. The whole purpose of this is to get a company hit by an unprecedented situation outside of its control back on its feet. The draconian concessions that the so-called competition authority is imposing will result in a weakened company that may not be able to compete. This EU action isn't going to result is some new legacy airline being born. It will result in Ryanair and Easyjet adding yet more flights to destinations already served or worse, allow foreign competitors (ME3, TK, US3) to come in and take market share from LH. All the while, AF/KL and IAG are laughing all the way to the bank.

The EU is ok with France eliminating competition in a market. They're also ok with handicapping LH so that they can't be an effective competitor/counterbalance to AF/KL and IAG.

AMALH747430 wrote:

Jetty wrote:

AMALH747430 wrote:

It also seems as if the EU competition authorities are picking and choosing here.

Yes, they are picking and choosing but for good reason. LH has been buying airlines left and right and now needs the most money out of all airlines. Moreover their market dominance at FRA and MUC is much larger than that of other airlines at the other major European hubs. Very good that the EU now picks LH as airline that has to forcefully trim down a bit.

"Trim down a bit." WOW! No, this is handicapping one company at the expense of others. Airlines work by having critical mass at hubs, take that away, and the business case goes with it. The whole purpose of this is to get a company hit by an unprecedented situation outside of its control back on its feet. The draconian concessions that the so-called competition authority is imposing will result in a weakened company that may not be able to compete.

What part did you mis about LH being way more dominant at FRA and MUC than i.e. BA at LHR, KL at AMS and AF at CDG? They will be able to compete just fine, but on a more equal footing, which is only fair if they receive most state aid.

AMALH747430 wrote:

The EU is ok with France eliminating competition in a market. They're also ok with handicapping LH so that they can't be an effective competitor/counterbalance to AF/KL and IAG.

This isn't about "handicapping LH" but rather about ensuring that LH doesn't abuse their strong market position. The state aid gives LH a benefit over competitors that did not get this specific support. For example, they could offer super low prices on certain routes to drive other competitors out; these competitors could then not keep up because they still need to make a profit. And when times get better, there will be no room for the competitor to re-enter the market because LH can simply hog the attractive slots. I think it's only fair to demand to give up slots.

I get that this may seem unfair when looking at the AFKL deal, but this is not "LH vs. AFKL", it's "LH vs. all other airlines" and "AFKL vs. all other airlines". And frankly, with the industry shrinking for several years I don't think any of these small measures will have a huge impact on each airline's performance.

mxaxai wrote:

mxaxai wrote:

Reports right now: The EU commission is asking for LH to surrender 24 slots and 8 aircraft (in total) at FRA & MUC in exchange for government support. No idea whether they can choose any slots and aircraft (e. g. 8 A320 + 24 slots on Saturday afternoon) or somebody else gets to decide for them.

Will provide link once proper articles become available online.

https://www.welt.de/regionales/hessen/a ... ungen.html [German]

The German government and the EU Commission agreed on a bailout deal today; a formal announcement is expected later this evening. LH is required to reduce their network by 4 aircraft and 12 slots at FRA and MUC each, for 8 aircraft / 24 slots total. This is halfway between the original demand of the EU for 20 aircraft and LH's offer for 3 aircraft. The EU justifies this size as the minimum viable size for a new competitor opening a base at FRA / MUC.

“Don’t bite the hand that feeds you”