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The German company Lufthansa has spent the last two decades creating a business empire that extends to the richest countries in continental Europe. The coronavirus is forced to stop working due to the coronavirus crisis, which is already seeking financial support from four governments Bloomberg TV Bulgaria referring to Bloomberg.
Europe’s largest airline warned Thursday night that it has no working capital and will not be able to survive without state aid from Germany, Switzerland, Austria and Belgium. Each of these countries has contributed their former national airlines to the expansion of the airline, which is negotiating an incentive package that could reach € 10 billion, according to people familiar with the matter.
It depends on the negotiations how much the German carrier from each country will receive and what influence they will have on the company.
The German government sees Lufthansa as a consistently important airline and will not allow it to collapse, a government official said on Friday.
Lufthansa has enjoyed its expansion in the last decade thanks to the continued growth of European travel. Before being hit by the effects of the spread of the coronavirus, the carrier, with more than 700 aircraft, dominated the commercial flight market and last year even considered adding Alitalia to its portfolio.
Lufthansa shares are trading at a minimum of 17 years. The airline is forced to land almost its entire fleet and in each of the countries with which it is negotiating it now has its own units. The company also looks forward to the European Union’s decisions on vouchers and state aid.
The airline is struggling to maintain its liquidity amid expectations that the market will not recover quickly this year. For most of its employees, Lufthansa uses a government program designed to compensate for wage losses when companies are forced to suspend operations. However, cargo flights continue to be carried out, including the transportation of medical supplies necessary to fight the virus, but revenues are not close to costs.
Lufthansa was a state company until 1990.
“The board is confident that the talks will be successful,” Lufthansa said Thursday night, and declined to comment further.
However, Germany’s ruling coalition is divided over the terms of aid for Lufthansa, say people familiar with the negotiations. While CDU’s more conservative conservatives, Chancellor Angela Merkel, would be pleased to see the government take a non-voting shareholding, its partner in the Social Democrats Coalition seeks powers to eventually cut jobs as a condition of public funding for Berlin
Austria
Lufthansa Austrian Airlines, based in Vienna, has intensive talks for several hundred million euros in short-term financing, according to people familiar with the negotiations. This will include loans, loan guarantees, and direct payments for lost income.
For long-term financing, the Austrian government urges Germany, Switzerland and Belgium to consider more discounts. Long-term support may include a direct stake in a German airline or the issuance of convertible bonds and regular loans.
Vienna has been in technical talks with Austrian Airlines so that the airline can formally seek state support, said a government spokesman, who declined to elaborate.
Switzerland
In Switzerland, where Lufthansa operates the Swiss national operator after its acquisition after the 2008 financial crisis, the state has ruled out the possibility of acquiring a stake in the company. The Treasury spokesman declined to comment further.
Belgium
Belgium is considering a € 290 million donation to Brussels Airlines, also a Lufthansa company acquired in 2009, according to local media reports.
“Instead of giving Lufthansa $ 10 billion in state aid that they will use to abuse their dominant position, Germany should reduce airport charges by 50% for all airlines,” said Ryanair CEO Michael O’Leary, In an interview.
The European Commission declined to comment on the Lufthansa situation, but said it was “very aware of the difficult situation in the aviation sector due to the coronavirus pandemic” and that EU rules allow governments to provide assistance.
The governments of Scandinavia and the United Kingdom have already provided funds for airlines, either through direct loans or government funds. Air France-KLM became the last airline to receive state aid, with shareholders from the French and Dutch governments pledging € 11 billion in loans and guarantees, while in Germany the tour operator TUI AG received loan guarantees from KfW for 1.8 billion euros.
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