Lufthansa bailout to trigger turf war from low-cost rivals

Bloomberg

Deutsche Lufthansa AG may have won its battle for state aid, but its surrender of airport slots to appease regulators heralds heightened conflict between European aviation’s old guard and low-cost challengers.
A rivalry that’s been simmering for years has been given fresh impetus by the coronavirus crisis, with former flag carriers falling back on government support as discounters including Ryanair Holdings Plc and Wizz Air Holdings Plc argue that the market alone should dictate who survives.
Lufthansa’s 9 billion-euro ($9.9 billion) bailout and a slots accord with the European Union handed the region’s biggest airline a lifeline. Now, the German group and network carriers such as Air France-KLM face a battle royale in repelling no-frills operators that came into the crisis stronger and plan to use it to gain ground in territories hitherto largely closed to them.
“We are trying to take advantage of the situation,” Wizz CEO Jozsef Varadi said in an interview. “Lufthansa is getting a huge financial edge, but they’ll need to restructure after taking all of this money. So Germany will bring opportunities.”
Discount airlines have received only modest support compared with legacy carriers. Ryanair, Wizz and EasyJet Plc have tapped the UK’s Covid Corporate Financing Facility for a combined 1.5 billion pounds ($1.8 billion), while
Air France-KLM has received
7 billion euros from the French state and could overtake Lufthansa’s bailout once Dutch support is finalised.
Low-cost carriers have also been quicker off the mark in slashing costs, with Ryanair, which has its biggest base at London Stansted, announcing 3,000 job cuts a month ago when Lufthansa was still in the early stages of putting together its bailout request.
The strength of the challenge to Lufthansa in particular will depend on take-up for the
12 pairs of daily flight slots to be made available to competitors at its Frankfurt and Munich hubs as part of the bailout settlement ordered by the EU. Complicating matters is a proviso that says only new entrants can obtain the takeoff and landing rights during the first 18 months.