Coronavirus-stricken airline group Lufthansa said its supervisory board was "unable to approve" a €9 billion German state rescue over fears of over-harsh conditions from Brussels.
"Conditions currently indicated by the EU Commission would lead to a weakening of the hub function at Lufthansa's home airports in Frankfurt and Munich" and must be "analysed intensively," the company said.
"Against this background, the Supervisory Board was unable to approve the stabilization package in connection with the EU conditions," it added.
The Lufthansa group, which also includes Brussels and Austrian Airlines and Swiss, has been bleeding €1m per hour with around 90% of its fleet grounded.
Under plans announced on Monday after fierce political wrangling, Berlin said it would take a 20% stake in the group, with an option to claim a further 5% plus one share to block hostile takeovers.
On top of a total €5.7 billion in extra capital, public investment bank KfW would also lend Lufthansa €3 billion.
The company would agree to pay back much of the capital plus interest, while granting the state two seats on its supervisory board.
But German media reported that Brussels competition watchdogs might demand concessions in return such as valuable takeoff and landing slots at Lufthansa's Frankfurt and Munich Hubs.
Such an intervention would be "incomprehensible bossing-around" of the company, said Markus Soeder, head of Chancellor Angela Merkel's Bavarian conservative allies.
Ryanair boss Michael O'Leary said this week that the airline would appeal against the planned part-nationalisation of Lufthansa, calling the deal "illegal state aid" that distorts competition.