On Wednesday, Lufthansa Group Chief Executive Carsten Spohr and Austrian chancellor Sebastian Kurz met in Vienna for their first face-to-face discussion on a bailout for Lufthansa subsidiary Austrian Airlines. In an interview following the meeting, Kurz implied his government might ask for a stake in the group in return for aid.
No aid just for the sake of it
Austrian Airlines, part of Lufthansa Group, has reportedly requested €767 million ($834 million) in state aid. Of this, a large part should be repayable loans and the remainder grants. The exact details are yet to be negotiated, but it would seem the Austrian government is not going to offer up the funds merely out of generosity.
“Aid without advantages for Austria as a business location, without a stake in Lufthansa, just for the sake of it, is not going to happen,” Austrian chancellor Sebastian Kurz told media following the heavy-weight meeting, according to Reuters.
“…we want to protect Austrian employees at Austrian Airlines as much as possible, and what can be the right way to do that is something we will look at. Today was the first discussion. Negotiations start now,” he continued.
Should Austria wish to claim a stake, there is very recent precedence right across the border. Just two days ago, information surfaced that the German government is requesting a blocking minority and one or two supervisory board mandates in return for a €9 billion ($9.7 billion) bailout for its national airline.
Negotiations in Germany, Austria, and Belgium
Lufthansa representatives are buzzing about continental Europe these past few days to secure government-supported funding. A spokesperson for the group told Simple Flying that:
“The Executive Board of Deutsche Lufthansa AG is continuing to negotiate intensively with the governments in Germany, Austria, and Belgium in order to secure the Group’s solvency for the long term.”
As reported by Reuters, the Swiss government stated on Wednesday that it would ask the country’s parliament to approve a 1.275 billion Swiss francs ($1.31 billion) guaranteed loan for Lufthansa subsidiaries SWISS and Edelweiss.
The Swiss relief package comes with clear conditions: funds can only be used for Swiss infrastructure, and no dividends or other payments are allowed until the airline has repaid the state-aid.
Eligible but asking a lot
Austrian Airlines, which is not planning to operate any scheduled service until June, is eligible for the Austrian coronavirus state aid scheme. However, it is asking for quite a bit more than what would usually be for a 90% state-guaranteed loan. (€120 million or $130 million, or a quarter’s revenue, which in Austrian’s case was about €527 million or $573 million, according to Lufthansa’s annual report for 2019.) Furthermore, the European Commission will have to approve the funding, as it recently did for struggling airline Condor.
The exact conditions Austria will place on its assistance are yet to be determined. Surely there are many grueling hours at the negotiating table ahead. As Austrian chancellor Kurz said, they are only really starting now.
What do you think Austria will ask for in return for granting its national airline aid? Let us know your thoughts in the comments.