Austrian Airlines Receives €300 Million Of Aid As Return Delayed Again

Austrian Airlines has had a couple of pieces of good news today, and one not so good outcome too. Firstly, the government has agreed to €300m ($330m) of state-backed loans, which is seen as a step in the right direction. Added to this, ground workers have agreed to a salary cut, which will translate to an additional €300m ($330m) of savings over the next four years. However, with its return to service pushed back a sixth time to June 15th, some are wondering if we’ll see Austrian flying at all before July.

Austrian Airlines, Flight Suspension, June
Austrian has had some funding agreed, but not all that it asked for. Photo: Florian Schmidt via Austrian Airlines

State aid secured, but not all that was requested

Austria’s government has finally reached an agreement with Lufthansa Group’s Austrian Airlines to provide loans to keep it afloat. Within the package, the government will support the airline to keep Vienna as a long-haul hub, marking a significant forward step in the negotiations.

According to reports in Reuters, the governmental department responsible for the COVID-19 rescue fund has agreed to loans totaling €300m ($330m). The funds will be administered over six years, and while guaranteed by the state will also be secured on the aircraft of the airline and will involve an equity interest in the carrier too.

Austrian Airlines, Flight Suspension, June
The airline has been grounded since March. Photo: Florian Schmidt via Austrian Airlines

This comes just a day after Lufthansa secured Europe’s biggest bailout yet, being handed a €9bn ($9.8bn) rescue package by Berlin. While Austrian’s bailout is a mere shadow of its parent’s package, it is hoped that further support will be delivered shortly. The airline had applied for €767m ($842m) in state aid in total, but any further assistance is likely to involve state participation in the company.

Agreement with ground staff

In another move forward for the airline, the ground staff of the carrier have voted in a majority of more than 90% to accept a temporary reduction to their salaries of around 15%. This is hoped to save the airline around €300m ($330m) in staff costs between now and 2024.

Of the 3,000 staff who will be affected by the cuts, 2,220 voted in the ballot. Rene Pfister AUA Works Council Chairman told Austrian Aviation that this was a positive step forward, saying,

“This high level of approval shows that the employees are ready to make a substantial contribution in the form of salary waiver and suspension of salary valuation for the future of AUA. They have shown a great sense of responsibility and they deserve a big thank you for that.”

Austrian Airlines Tails
Ground staff have agreed to a substantial wage cut. Photo: Austrian Airlines

Of course, the ground workers are only a fraction of the 7,000 people currently employed by Austrian Airlines. The Kurier suggests that the final bailout for Austrian could be less than requested, floating a figure of €650m ($714m) as a potential bailout amount. However, it depends on negotiations just how much control the Austrian state will require further funding to be awarded.

Planned return delayed again

While Austrian has been attempting to stay positive about returning to operations, this movable feast seems just to keep moving away. Following the fifth pushback of the date of return to service last week, to the June 7th, the Austrian Airlines website now states that flights are now canceled until June 14th.

Austrian Airlines
Will we see Austrian fly again before July? Photo: Florian Schmidt via Austrian Airlines

While the sixth pushback of service resumption is unsurprising, given the current climate, every day is costing the airline yet more money in lost revenue. Even worse, with tickets on sale for flights that are not going ahead, this has to be adding to the administrative burden that the airline will need to resolve.

With some insiders suggesting it could be July before flights actually take off, you have to wonder if the airline wouldn’t be better off taking a more conservative viewpoint.