On Friday, European Competition Commissioner Margrethe Vestager required the divestment of eight aircraft with 24 landing slots at Frankfurt and Munich airports, as conditions to Lufthansa securing a 9-billion euro bailout package from the German government.

This represents a dilution (by 2/3 of the initial 72 slot pairs the Commission had originally demanded) and means Lufthansa is giving up in effect, 12 flights per day out of its home hubs. This seems a small price to pay for what is, in effect a Euros 3 billion repayable amount (the rest being a capital injection).

Amongst other fine print, the slots will only be offered initially to airlines who do not already fly from Frankfurt or Munich - a condition which although it appears to boost competition, in fact excludes budget airlines like Ryanair (who has labelled Lufthansa a bailout junkie and threatened to challenge a Commission approval) and easyJet.

The European Commission must still formally approve the bailout, which will involve the German Government taking a 20 percent share in the airline (increasable to 25%). The deal could be one of the first measures approved under the EU's new recapitalisation rules which set out the terms under which Governments can take equity stakes in companies in return for state aid.

Blue Skies and tax dives

Vestager has made clear that despite calls for "green strings" to be attached to airline and other industrial bailouts, the Commission lacks the legal basis to do so under emergency state aid provisions (contained in Articles 107(2)(b) and 107(3)(b) of the EU Treaty). Member States on the other hand are permitted to attach such conditions to their grant of aid as the French Government did with Air France KLM's bailout earlier this month. 

The Commissioner has also encouraged Member States to apply conditions in relation to tax avoidance by companies: Denmark, France and Poland have, so far, all excluded companies registered in offshore tax havens from receiving emergency aid.

Whilst member state governments are spending vast sums on fiscal support for companies, it remains to be seen whether agreement can be reached on a joined up, EU wide recovery fund, and if so what conditions will be attached in the form of wider European political objectives: most notably in relation to environmental sustainability and digitalisation. The Fund is at present mired in debate over the EU's next 7 year budget.