Condor Keeps Flying Thanks To 380M Euro Bridging Loan From The German Government

Passengers of Condor have one less worry for the foreseeable future as the German government approved a 380 Million Euro loan for the carrier which was on the verge to tumble down as part of the Thomas Cook insolvency.

The bridging loan is supposed to ensure ongoing operations and especially to keep the airline flying without leaving a substantial amount of German holidaymakers stranded abroad.

For now the loan has still to be approved by the European Union but it’s not unusual as Germany has done something like this in the past when Air Berlin went bankrupt and was subsequently carved up and swallowed by Lufthansa and Easyjet. Interestingly the last tranche of the Air Berlin loan has been paid back just this month.

Earlier this week I wrote about the Thomas Cook insolvency and that mainly UK passengers are now stuck somewhere in the world.

Bloomberg reported today that Condor is now looking to stabilize thanks to the financial resources provided and keep operating.

German airline Condor’s request for emergency financing was granted by Chancellor Angela Merkel’s government in a bid to get the tourist carrier through the winter after the demise of U.K. parent Thomas Cook Group Plc.

The bridging loan worth 380 million euros ($420 million) must be approved by the European Commission and will be valid for six months, according to the airline, which has around 5,000 employees. Some 240,000 tourists are currently relying on Condor to get back to Germany from vacation, Germany’s Economy Ministry said.

The government is in “constructive talks” with the EU executive on the loan, the ministry said in a statement late Tuesday, adding that Condor should also be protected from Thomas Cook’s creditors. The Commission said Wednesday its in “close and constructive contacts with the German authorities.”

“We are a healthy company, and the liquidity we generated has in the past been buried at the parent company,” Condor Chief Executive Officer Ralf Teckentrup told reporters Tuesday. “This bridge loan will take us through the coming winter. In summer, an airline like us needs no such bridge loan.”

… Condor operates 59 of the group’s more than 100 aircraft, and Teckentrup said he is hopeful the unit can find a new home. The bridge loan will protect “many” of the jobs at Condor, Economy Minister Peter Altmaier told reporters in Berlin Tuesday.

“Condor is a profitable company, so our decision is based solely on its business, and not on political criteria,” Altmaier said.

The German state of Hesse, where Condor has its headquarter, said it will take on 50% of the risk that the federal government is assuming by providing a state guarantee of 190 million euros. …

The article also had additional information about the destiny of the German arm of the Thomas Cook Group:

 … The company’s German tour operator Thomas Cook GmbH — with brands including Neckermann, Bucher and Oeger — filed for insolvency Wednesday to separate itself from liabilities associated with the liquidation of the parent, a prerequisite for a court-led restructuring. The units are profitable and still have a chance to continue in business, the operator said, adding that a court will appoint an expert to restructure them.

An Economy Ministry spokeswoman said later on Wednesday that the operator has asked for a bridging loan of its own and the request is being assessed by government agencies. She declined to give further details.

Zurich Insurance Group AG is the provider of insolvency insurance for the German business and will pay for hotels and flights as customers are repatriated, travel association DRV said.

Meanwhile, Thomas Cook’s Nordic Ving unit said Tuesday that it and airline Thomas Cook Airlines Scandinavia are not included in the parent’s bankruptcy and continue operations as an independent company. That also applies to other Nordic entities in the Thomas Cook Northern Europe unit, such as Spies, Tjareborg and Globetrotter, Ving said.

Mind you the liability under the bankruptcy policy is 110 Million Euro as I stated in my earlier article on Monday.

It appears that the most unprofitable part of the Thomas Cook Empire was their UK division, especially their over 500 Thomas Cook Travel shops who sold the tour packages.

The Scandinavian division was profitable and the German brands weren’t doing too bad either.

Condor has always been quite successful and the carrier has changed hands many times in the last decades. Lufthansa has always been an actor in these transactions and then of course Thomas Cook Germany.

I’m actually flying on Condor to Portugal this afternoon (booked on Tuesday) as I wanted to use a customer service voucher and gambled the airline would still be alive today.

Conclusion

The executives appear to be hopeful as far as the future of Condor is concerned even though that doesn’t mean much. So were the the executives of Swissair short before it went bankrupt.

Providing the bridging loan is a sensible decision by the German government especially after the good experience with Air Berlin. The governments primary concern is to not have hundreds of thousands of citizens stranded all over the world and at the same time preserve the jobs associated with Condors operations.

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