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Lufthansa state aid breach European competition rules

While many airline groups around Europe have received state aid, no other package got so much attention as Lufthansa’s did. Its main rival in the skies above Europe, Ryanair, publicly slammed the $10.1 billion (€9 billion) package. A publicly addressed letter stated that it was “in clear breach of European competition rules” and indicated plans to refer to court if the European Commission did not reverse its decision.

Chief Executive Officer (CEO) of Ryanair Michael O’Leary stated that this was a “spectacular case of a rich EU Member State ignoring the EU Treaties to the benefit of its national industry and the detriment of poorer countries.” Lufthansa did not need the bank-breaking $10.1 billion (€9 billion) bailout, according to the German airline’s own CEO, indicated O’Leary.

The Irish businessman was highly critical of the state aid package when rumors started to spread about it, calling Lufthansa a “crack cocaine junkie.” O’Leary questioned why the German airline group would need so much additional capital, as planes were grounded at the time and carriers had limited expenses. He further added that Lufthansa was “off their heads” and speculated that it would use the injection to buy up smaller competitors within Europe.

Concerns for the low-cost segment

“This bailout money will be used to bully smaller rivals out of the market, in line with Lufthansa’s grim record of anti-competitive behavior,” said Michael O’Leary.

“Only last week, the Italian press reported that Lufthansa’s Air Dolomiti was “teaming up against low-cost” with three other airlines, to introduce minimum prices,” as Austrian Airlines is also setting up to introduce minimal airfares.

Both the Austrian and Swiss governments introduced new legislation to increase taxes on flights to and from their respective countries, effectively ending cheap travel. In Austria, the Minister of Transport indicated that following the new anti-dumping flight ticket policy, a round trip to the country should cost no less than $44 (€40) per passenger.

“The Commission’s approval of the Lufthansa bailout today is a betrayal of the core principles of EU law, which we have no alternative but to refer to the EU General Court.”

 

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