Lufthansa Group’s Austrian Airlines announced today that it has received several sources of financial aid to see it through the difficulties of the pandemic. The funding, which will come in the form of loans and investment, is badly needed right now as many airlines have been operating at 10 percent of normal capacity or less.
“Austrian Airlines has been and is a fundamental part of the multi-hub strategy pursued by Lufthansa Group. Thanks to this rescue package in combination with the improved framework conditions of the Austrian aviation system partners, we see ourselves in a position to rebuild the flight hub in Vienna after the crisis and connect Austria with important destinations in Europe and throughout the world” – Carsten Spohr, Chief Executive Officer of Lufthansa Group
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According to a statement from the airline, financial assistance will come in the following forms:
- €150 million in state aid will cover coronavirus-related losses; ecological requirements imposed
- A €150 million injection of equity capital by Lufthansa
- €300 million will come in the form of bank loans, which will need to be repaid by 2026
As you can see, the total coronavirus financial assistance comes to €600 million This rescue package, the airline says, is designed to maintain its status as a flight hub to CEE (Central-Eastern Europe) and secure long-haul flight connections.
The airline and government recognize Austrian Airlines’ role as an economic driver, citing data from the Austrian Economic Chambers, which states that the airline is linked to €2.7 billion in domestic value creation. Furthermore, the airline and its presence at Vienna airport is responsible for 17,500 jobs and €1 billion in taxes and duties.
The strings attached
As many have predicted, some governments are using funding as an incentive and opportunity to shape environmental policies and meet sustainability goals. As a condition of funding from the Austrian Federal Government, binding commitments to the Vienna aviation hub are linked to strict ecological requirements, the airline says.
The following are requirements attached to the funding:
- Austrian Airlines will shift passenger traffic to the railways on short-haul flights inasmuch as adequate infrastructure is available, and direct access to Vienna Airport is ensured, based on a travel time of fewer than three hours.
- CO₂ emissions within Austria should be cut in half by 2030.
- Austrian Airlines has pledged to increase jet fuel efficiency by 1.5 percent annually and to reduce average CO₂ emissions per 100 passenger-kilometers of the entire Austrian Airlines fleet, from 9.55 kg to 8.5 kg by 2030.
- CO₂ emissions are to be reduced by 30 percent by the year 2030 from the comparable level of 2005.
Austrian Airlines says that it is possible two members belonging to the airline’s majority stakeholder group will be appointed to monitor compliance with all the conditions laid down in the agreement.
“I am relieved and thankful that we have succeeded together in making Austrian Airlines ready for take-off again…After almost three months on the ground, Austrian Airlines will lift off again and slowly ramp up its flight operations in accordance with international travel guidelines. We look forward to soon welcoming passengers on board our flights once again” – Alexis von Hoensbroech, CEO, Austrian Airlines
While funding seems quite sure to be delivered, it’s not a completely done-deal just yet. The entire financing package is dependent on state aid for Lufthansa in Germany. Furthermore, the approval of all corporate bodies and the consent of the EU Commission is required.
What do you think about the conditions attached to the funding? Are they too limiting, or is this a smart move? Let us know in the comments.