Things are looking up again at Lufthansa. The repayment of state aid shows that the worst is over.
(Photo: dpa)
What an emotionally charged debate it was: Last year, the rescue operation for Lufthansa was discussed for months. Some did not want to give “Hansa” any tax money, others prefer to nationalize the company entirely.
A year and a half later, all that remains of the controversial rescue package is the federal government’s stake in Lufthansa. The rest has been paid off. For the critics of the whole rescue operation, the grist is likely to be on their mill. Wouldn’t it have been possible without help?
The straight answer is no. First: The pandemic is a unique event so far and came with an unknown force. In the weeks from the beginning of March to the end of May 2020, no one could foresee how long the crisis would last. Aviation was hit very early and particularly hard by the consequences of the coronavirus. Investors turned their backs on the industry at a rapid pace.
It was impossible for the “Hansa” to raise money on the capital market. But that is exactly what the group urgently needed. Millions of euros flowed out every minute. Without liquidity, it is hardly possible for an airline to safely maintain flight operations. It is not without reason that authorities such as the Federal Aviation Office also look at the liquidity when reviewing an airline.
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Second: Even if the Lufthansa management struggled for a long time about the federal government’s participation, in the end it helped to quickly rebuild trust with investors. Because the state means security. Without them, the management would hardly have been able to place the numerous bonds so successfully in the past weeks and months.
State aid provided time for the realignment
Third, bankruptcy is always an alternative. But the associated damage to the fields would have been enormous. Everything that Lufthansa has painstakingly built up over the years and made into one of the world’s leading airlines would have been gone – especially the trust. In the USA this may be possible with Chapter 11, in Germany bankruptcy is still flawed.
The repayment of aid that has now taken place and the fact that the airline group is well positioned in terms of liquidity show that the rescue operation was a good and right decision for all sides. The federal government earns money and has not wasted any of the taxpayers. Lufthansa had time to realign the company and start the upswing at lower costs. Even if the company lost more than 30,000 jobs, it was the best of all solutions even for the employees. In the event of bankruptcy, the damage would have been more devastating.
The Lufthansa case, however, does not serve as a blueprint. Previous crises have shown that when things pick up again, it will be quick and powerful. Therefore, management was able to accept grants with a steeply rising interest rate. One could hope to get rid of this burden quickly. Other industries cannot rely on such a cycle.
More: Lufthansa boss Carsten Spohr: “We are now crisis-proof”