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Austrian Airlines Takes Financial Recovery Package
As the list of airlines that have received government-backed financial support grows during the COVID-19 pandemic, Austrian Airlines has announced that it will be the newest member of this group. In a press conference, the Vienna-based carrier announced that they would receive a total of 600 million euros ($677 million) in financial aid. This aid package includes money from the Austrian government and Austrian’s parent company, the Lufthansa Group.
The Austrian government issued 150 million euros in direct state aid, Lufthansa issued 150 million euros in an injection of equity capital and the remaining 300 million euros are loans to be paid back to banks by 2026. The 600 million total aid is 167 million euros less than originally reported by the airline, in part due to their ability to restart flying sooner than originally expected.
At the press conference, CEO of Lufthansa Group said, “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.”
In return for the government backed aid, the Austrian Federal Government has put into place a list of environmental and ecological requirements that the airline must reach. Some of the specific requirements that were put into place include the transfer of some short-haul passengers to trains, cutting carbon dioxide emissions 30% by 2030 when compared to 2005 and to increase jet fuel efficiency by 1.5% annually across the airline.
While the latter two points are simply laid out and relatively easy to measure progress, the transfer of short-haul passengers to trains brings up an interesting topic. While Austria is not the first country to ask this of their airlines, the exact requirement is quite vague.
According to the airline, the idea will be that traffic is funneled to railways as long as there is adequate infrastructure available and the direct access to Vienna Airport is ensured with a travel time of considerably less than three hours. In addition to this confusingly worded expectation regarding the use of trains, the government continued to say that the objective is to ensure the continued connection of Vienna as a Lufthansa Group hub.
In a similar move as laid out in the original Lufthansa state-aid package, the Austrian state holding company will have the ability to place two people on the Managing Board of Österreichische Luftverkehrs-Privatstiftung (ÖLP). OLP is the private foundation that owns a majority stake in Austrian Airlines. The two members that are appointed to the managing board, will also serve on the supervisory board of the airline.
The airline also announced that it would be saving nearly 300 million euros due to a contribution by nearly 7,000 employees. These contributions are simply a nicer way of saying they will be taking salary cuts.
The entire financial deal is not confirmed however. It will hinge on Lufthansa taking state aid from Germany along with the approval from the European Union Commission.
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