Will Germany try to block the takeover of Condor by Polish capital? They are considering a complaint to the European Commission

There were signals (“Sueddeutsche Zeitung” writes about them) that Lufthansa is considering applying to the European Commission for proceedings against the Polish Aviation Group (LOT is part of it) regarding the purchase of German Condor. The Germans from Lufthansa hurt that in 2014 Brussels agreed to grant EUR 200 million in public aid for LOT. Under EU law, state aid may be granted once every 10 years. Lufthansa Germany believes that LOT received such assistance for the second time, i.e. in 2018, thanks to which it was now possible to buy the Condor line. Let us remind – in the spring of 2013, then Prime Minister Donald Tusk said that LOT Polish Airlines is a “bottomless well” and that “the only real alternative to the scenario of constantly recurring problems is privatization.” At the beginning of April 2013, the Council of Ministers even adopted a special bill enabling the sale of a majority stake in PLL LOT. This change of law paved the way for the privatization of our national carrier. It was said that the buyer could be Turkish airlines Turkish Airlines or German Air Berlin. Fortunately, nothing happened to LOT. Successful investments (acquisition of shares of the Estonian carrier Nordica; purchase of a new fleet of aircraft; opening of new connections) and good economic situation caused that our national airlines increased the number of passengers from 4.3 million (2015) to 10 million served in 2019. Interestingly, LOT’s expansion almost coincided with the marginalization and final collapse of the German Air Berlin airlines, which completed their flight operations on October 28, 2017. In 2018, Polska Grupa Lotnicza (PGL), a state-owned holding formed by LOT, as well as ground handling and service companies, was created. All companies that were part of the group (i.e., LOT Polish Airlines, LOT Aircraft Maintenance Services sp.z o.o., LS Airport Services SA. And LS Technics sp.z o.o.) contributed their shares to PGL. As a result of the above, it can be said that the state-owned PGL is currently the owner of LOT. And here Germans from Lutfhansy see the problem. As reported by “Sueddeutsche Zeitung”, the management of the German giant is of the opinion that the creation of PGL (which included LOT Polish Airlines) is a form of unlawful state aid for our national air carrier, which consequently enabled the acquisition of the German Condor. Importantly – such assistance can, with the consent of the European Commission, be granted only once every 10 years. Meanwhile, Brussels last time agreed to provide state assistance to LOT in 2014. So 10 years have not passed, which for the Germans of Lutfhansa is to be a sufficient reason to consider the option of submitting to the European Commission a complaint against the Polish Air Group regarding the purchase of German Condor lines. What would be the result of such a complaint if the Germans decided to file it? Hard to predict today. On the one hand, LOT Polish Airlines – contrary to what Germany claims – did not receive any state aid directly in 2018. On the other hand, some “warmed up” Eurocrat who wants to fight for “Polish democracy” may find that the state’s activities of establishing the Polish Aviation Group and taking over the shares of five companies (including LOT Polish Airlines) could be counted on winning a larger ” creditworthiness “in banks controlled by the State Treasury, thanks to which it was easier to organize capital for the acquisition of German Condor (the purchase of this airline will be credited). If this narrative prevails, then PGL will have to forget about taking over Condor. The company will be obliged to sell this company, and in such circumstances the transfer fee will probably be many times lower than the amount of its purchase. In other words – PGL will come out on Condor, like Zabłocki on soap.