Ryanair to challenge Lufthansa’s €9bn aid

Ryanair will challenge a €9 billion government bailout of German rival Lufthansa, the Irish carrier confirmed on Tuesday.

The German government this week agreed to give Deutsche Lufthansa €9 billion to support it through the Covid-19 crisis in return for a 20 per cent stake.

Michael O'Leary, Ryanair Holdings chief executive, vowed to ask the European courts to overturn the deal on the grounds that it was illegal state aid.

"Ryanair will appeal against this latest example of illegal state aid to Lufthansa, which will massively distort competition and [the] level playing field into provision of flights to and from Germany for the next five years," Mr O'Leary declared.

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The Irish group condemned the €9 billion deal saying it came on top of extensive payroll support already given to Lufthansa and warned it would further strengthen its rival’s monopoly-like grip on German air travel.

Ryanair predicted that Lufthansa would use the cash to sell flights below their cost, giving it a state-funded advantage over non-aided rivals including the Irish carrier, Easyjet and British Airways.

The group accused French and German governments of providing "enormous" state aid to their airlines, distorting competition around Europe.

Ryanair is also challenging a tax break given by the French government to airlines registered in that country, which is said to be worth €200 million to Air France KLM.

Mr O’Leary argued that Lufthansa was “addicted” to state aid. “Whenever there is a crisis, Lufthansa’s first reflex is to put its hand in the German government’s pocket,” he said.

Lufthansa claimed it needed €9 billion from Germany, along with €1 billion from Switzerland, €800 million from Austria and €500 million from Belgium, for subsidiaries in those countries, on top of payroll supports that it already receives, he said.

Ryanair is not against payroll support schemes, given by most governments to airlines and businesses hit by the Covid-19 crisis, as these are available to all carriers. However, the Irish group opposes supports such as those offered by Germany to Lufthansa, which is says are illegal state aid.

As part of the German deal, the government, led by chancellor Angela Merkel, will pay about €300 million for new Lufthansa shares at €2.56 each, the nominal value of its stock on the group's balance sheet.

The agreement also includes a €5.7 billion investment via so-called silent participation, a hybrid of debt and equity. In addition, the state will back a three-year loan of €3 billion to the airline.

EU law bans state aid to businesses where it threatens to distort normal commercial competition.

However, the European Commission has signalled that it will relax these rules for airlines, largely grounded by pandemic travel restrictions, as it bids to revive the region's ailing €1.5 billion tourism industry.