European Commission approves €6 billion German measure to recapitalise Lufthansa

posted on 26th June 2020 by Eddie Saunders
European Commission approves €6 billion German measure to recapitalise Lufthansa

The European Commission has approved German plans to contribute €6 billion to the recapitalisation of Deutsche Lufthansa AG (DLH), the parent company of Lufthansa Group. The measure was approved under the State aid Temporary Framework adopted by the Commission on 19 March 2020, as amended on 3 April and 8 May 2020.

The recapitalisation measure is part of a larger support package that also includes a state guarantee on a €3 billion loan that Germany plans to grant to DLH as individual aid under the German scheme approved by Commission decision of 22 March 2020.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Germany will contribute €6 billion to Lufthansa’s recapitalisation, together with a €3 billion state guarantee on a loan. This substantial amount of aid will help Lufthansa weather the current coronavirus crisis, which has hit the airline sector particularly hard. But it comes with strings attached, including to ensure the State is sufficiently remunerated, and further measures to limit distortions of competition. In particular, Lufthansa has committed to make 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, ensuring fair prices and increased choice for European consumers.”

The German recapitalisation measure

Germany notified to the Commission under the Temporary Framework a €6 billion recapitalisation of DLH. The plan comprises:

(i)   €300 million equity participation through the subscription of new shares by the State, corresponding to 20% of DLH’s share capital;

(ii)   €4.7 billion silent participation with the features of a non-convertible equity instrument; and

(iii)  €1 billion silent participation with the features of a convertible debt instrument.