Lufthansa is on the cusp of receiving a massive bailout from four European governments. But with money comes coercion and the debate now shifts to how much control should be asserted over the German airline group.
Lufthansa Group Poised To Receive €10 Billion Bailout
The Lufthansa Group, which includes carriers Austrian, Brussels Airlines, Lufthansa, and SWISS, now sees a government bailout as its only mean of survival. Viewed as too important to fail, Lufthansa is working with the Austrian, Belgian, German, and Swiss government on a rescue aid package for €10 Billion, the majority of which would come from Germany.
Lufthansa is burning through €1 million per hour and now has a reserve of about €4 billion…with ticket liability of €4 billion. Lufthansa has stoped issuing refunds and the German government has been supportive of such measures.
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With time running out, Germany has taken the lead in negotiating an aid package that will save jobs and breathe fresh life into these struggling carriers. Even with the bailout, though, Lufthansa expects to shine by 10,000 workers and 100 planes in the short-term.
Will Governments Exert Control Over Lufthansa?
In Germany, the Social Democrats (SPD), a center-left party and part of the ruling coalition, want to exert control over Lufthansa in exchange for aid.
“If companies such as Lufthansa receive billions of euros in state aid from taxpayers’ money, the federal government must also be guaranteed a say in the matter.”
But the Christian Democratic Union (CDU) and Christian Social Union (CSU), the two more conservative coalition partners, feel that government involvement would hurt Lufthansa’s competitiveness and ultimately hurt consumers and employees. Instead, the infusion in cash is considered a short-term effort to shore up a critical element of the German economy.
“The necessary later exit from the state holding will be made even more difficult if the state is involved in the management of the company.”
That debate will continue this week, as the government sits down with Lufthansa for another round of talks.
Aid for Lufthansa and its subsidiary airlines is all but certain. The question now is whether Germany and other European governments will demand not only equity, but a seat at the operational table in exchange for this aid.
> Read More: Lufthansa Seeks State Aid From Four Nations