The coronavirus pandemic has caused serious trouble to the airline industry of Germany. The nation’s premium leisure airline, TUI Germany, has today announced the signing of state aid loan worth €1.8 billion ($1.97bn) with the German federal government. On the other hand, Europe’s second-largest airline group Lufthansa is seeking state aid for its survival. This acknowledgment comes after the airline grounded 95% of its fleet.
TUI AG also known as TUI Germany is an airline of choice for tourists. Having flights to mainly international travel destinations, the airline earns most of its revenue during peak tourist seasons. Since the announcement of international travel restrictions and the subdued demand for travel, the airline has found itself in an unsustainable situation.
As a result of current circumstances, TUI AG had last week decided to apply for a federal loan. Today, the loan was accepted by the German government as a part of the COVID-19 state support program. The money will not only be used by TUI Germany but also by its other subsidiary in Belgium.
TUI CEO, Fritz Joussen, appreciated the German government after the loan got accepted, saying in a statement carried by Aviation24,
“The German Government has acted quickly to support jobs and companies during these exceptional times. We are now preparing intensively for when our operations can resume after the Coronavirus crisis.”
What about the Lufthansa Group?
The Lufthansa Group, which is made up of Lufthansa, Austrian, SWISS, Brussels Airlines, and Germanwings, is in dire need of funding to survive the current airline industry crisis. To date, the airline group has put forth its request for a multi-billion dollar state aid in Germany, Austria, Switzerland, and Belgium.
Following the news of Lufthansa’s acknowledgment on the matter, Lufthansa CEO Carsten Spohr said in a statement carried by Channel News Asia,
“I am optimistic that the talks in Bern, Berlin, Brussels, and Vienna will lead to good and positive results.”
Although the German government seems open to the idea, it is highly speculated that they might ask for an equity stake in the airline. We might be able to get a clearer picture on this matter in the next few days.
The industry might not recover for years
It is no surprise that the airline industry is going through unprecedented challenges. Such challenges have forced airlines to take unprecedented decisions. Lufthansa had yesterday announced the closure of its low-cost subsidiary Germanwings. Additionally, it warned that the airline industry might take years to return to the pre-coronavirus level.
Moreover, Lufthansa had yesterday announced its plans to permanently decommission 32 of its aircraft. Out of these are six A380s, seven A340-600s, three A340-300s, five 747-400s, and 11 A320s. The reason behind this decision seems practical. Lufthansa is gearing up for the change in travel demand after the coronavirus crisis ends. With a very low predicted demand, flying less-efficient aircraft widebodies and that too mostly empty will not be a good idea.
It is expected that there will likely be more similar decisions taken in the coming days. Although the near future looks bleak, airlines are trying their best to be able to cruise through these turbulent times.
Do you think Lufthansa will get through this crisis? Let us know in the comments.