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Law360 (May 26, 2020, 4:29 PM EDT) -- Ryanair said it would challenge the German government's decision to bail out Lufthansa for €9 billion, or $9.8 billion, saying Tuesday the move would "further strengthen Lufthansa's monopoly-like grip on the German air travel market."
The budget airline said in a statement that the German government's subsidization of Lufthansa "distorts competition with other providers across Europe," and would enable the largest German airline to potentially engage in "below cost selling" for in-Europe flights and other longer routes.
"Lufthansa is addicted to State Aid. Whenever there is a crisis, Lufthansa's first reflex is to put its hand in the German Government's pocket," Ryanair's CEO Michael O'Leary wrote in the statement, claiming Lufthansa asked for aid from the Swiss, Austrian and Belgian governments.
O'Leary questioned the ability of Ryanair and other airlines — like EasyJet and Laudamotion — to compete with Lufthansa in the short route market with the subsidies in play. He also accused the German government of breaking European Union state aid rules repeatedly with Lufthansa, resulting in them having a "monopoly in the German domestic market."
The CEO said Ryanair would appeal the move, which he said was the "latest example of illegal State Aid" to the major airline that would "massively distort competition and level playing field into provision of flights to and from Germany for the next 5 years."
Lufthansa announced Monday it was approved for a package from Germany's Economic Stabilization Fund that would provide "stabilization measures and loans" of up to €9 billion.
More specifically, the German government will take a 20% stake in Lufthansa and inject €5.7 billion in non-voting capital in the airline. Stabilization measures also include a three-year, €3 billion credit line from German state-owned development bank KfW and other private banks.
The deal comes in the wake of the coronavirus pandemic, which has significantly decreased air travel worldwide. In April, a group of 10 major American airlines reached preliminary deals with the U.S. Treasury for billions in grants and loans in order to prevent layoffs and keep paying employees under the Coronavirus Aid, Relief and Economic Security, or CARES, Act. The law allotted $25 billion in direct grants for passenger airlines to pay employees through September.
Lufthansa's bailout is still subject to approval by the company, the relevant entities involved and the European Commission.
Ryanair and the European Commission declined to comment further on the bailout package.
Representatives from Lufthansa did not immediately respond to requests for comment Tuesday.
--Additional reporting by Linda Chiem. Editing by Amy Rowe.
Update: This story has been updated with the European Commission's declination of comment.
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