Another week has flown by with Germany and Lufthansa still unable to come to an agreement on a bailout. The unresolved issue remains how much control Germany should exert over Lufthansa.
Yesterday, German Economy Minister Peter Altmaier said his government his moving toward a more “concrete model” in finalizing an aid package for Lufthansa. What that means is not clear, as Germany’s ruling coalition remains deeply split on how much control the federal government should have over the airline.
Altmaier, a member of the Christian Democratic Union (CDU), does not want Germany to exert control over Lufthansa, even with a bailout, stating:
“For me it’s important that we don’t exert any influence on business decisions. That has never worked in the past.”
His view is shared by his CDU and Christian Social Union (CSU) colleagues, including Chancellor Angela Merkel. But the Social Democratic Party (SPD), junior partners in the coalition, insist that the government have a say on dividends, job cuts, and strategy in general.
The Green Party, not part of the governing coalition, is demanding Germany take an even more active role than SPD is proposing.
Altmaier, however, left open some room for a compromise:
“I’m a firm supporter of the market economy and am convinced that the state should not increase its holdings during this crisis – at least not for the long term.”
Perhaps a short-term holding is the quickest way to a solution?
> Read More: German Government Debates Micromanaging Lufthansa
A Warning To The German Government
The German government should be very careful and learn from its counterparts across the Atlantic. In the United Staes, Airlines were bailed out on the condition that no job cuts or deceases in pay rates take place before October 1, 2020. Yet airlines have found a loophole to leave pay rates in place while reducing hours, resulting in…lower pay rates.
Germany, as a nation, has embraced a widespread part-time model in past periods of economic distress, but any negotiations with Lufthansa should leave out loopholes allowing for a circumvention of expressed intentions.
Put another way, Lufthansa is tricker and than its American counterparts. Germany better be ready.
CONCLUSION
Lufthansa has seen passenger counts down 99% and grounded 700 aircraft. Most of this drop in demand is well beyond its control. But if Germany is determined to go down the bailout path, it should learn from the mistake of other nations in crafting the terms and conditions of the bailout. In any case, Lufthansa remains a pawn for now.
> Read More: Lufthansa Considers Strategic Bankruptcy
I disagree somewhat about Lufthansa being a pawn. Yes they’re in the middle of a political power play but not only is that power play only in existence because of Lufthansa but the airline wants everything while being unwilling to concede much, which exacerbates the situation. Given Lufthansa’s rather fervent anti-customer stances, having the government be a tiebreaker until Lufthansa pays back any money doesn’t seem too much to ask.