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Lufthansa Group Extends Negotiations Over Government Aid

A Lufthansa A380 parked after diverting to Austin. (Photo: AirlineGeeks | Mateen Kontoravdis)

Over the last few weeks, Lufthansa Group has been negotiating with German, Austrian and Belgian governments over rescue packages after the group made a $1.3 billion loss during the first quarter of the year amid the COVID-19 crisis. Reports by Bloomberg revealed that Lufthansa was negotiating a 10 billion euro ($10.3 billion) bailout from the German government in exchange for a 25 percent stake in the airline. However, it seems that the carrier is unwilling to accept state aid under those conditions and is seeking an agreement that is more favorable for them, as reported by FlightGlobal.

In its annual shareholder meeting held virtually, Carsten Spohr, Lufthansa CEO remarked over government support negotiations saying, “At the moment we are not only discussing the levels of the necessary amounts but are also negotiating the conditions and timelines as to when this help can be made available”.

The executive expressed against the German government taking a stake in the airline, stating that its involvement would hamper the airline’s “entrepreneurial freedom of decision and action.”

As reported by CNN, analysts point out that potential state involvement could interfere with the way the airline wants to run in the future as it restructures to become smaller in size as it prepares to set off again in what would seem to be a smaller post-COVID market, at least in the short term. Such a thing would threaten more than two-thirds of the group’s 130,000 global workforce. Hence why it would be logical for the state to counteract if it were to get involved in the airline.

Meanwhile, Lufthansa group member Austrian Airlines has applied for 767 million euros of government support, mostly in the form of government loans. Swiss on the other hand, which is also part of said holding, has been granted a rescue loan package of 1.3 billion Swiss francs ($1.5 billion) by the Swiss government to be used by Swiss and Edelweiss, its leisure subsidiary.

The International Air Transport Association has estimated revenue losses attributed to COVID-19 had exceeded $314 billion by mid-April. With the unprecedented impact the pandemic has had on the global aviation panorama, most airlines around the world are in no choice than to ask for government bailouts as no reserves can cover the losses generated of almost two months with very limited mobility.

In this way, it can be expected for the role of airlines to change in some jurisdictions and to some extent. If airlines sought to survive, accept government support, committing to a set of conditions based on what’s best for different national interests, this does not necessarily fully match with what any private and for-profit institution seeks to maximize.

Jose Antonio Payet
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  • Jose Antonio Payet

    As a geography nerd, Jose has always been fascinated by the complexities of the airline industry and its ability to bring the world closer together. Born and raised in Peru, now studying in the UK. he has travelled around America, Europe and South East Asia. His favorite aircraft is the Boeing 767-300, which he has flown many times during his childhood; although now the A350 is slowly growing up on him.

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