According to German media reports Lufthansa is now in active negotiation about a government rescue package worth €9 Billion after the company has admitted to run out of liquidity in a few weeks.
Lufthansa loses €1 Million per hour in the current situation which puts further stress on the airline after the majority of the fleet is grounded and only a bare bones schedule is active at this time.
At the end of last week Lufthansa confirmed a very desolate financial position including a 1.2 Bln Euro loss in Q1 and the admission that the company will run out of cash in a few weeks.
Senior LH management has already realized that they won’t be able to access any further lines of credit so now the only way to secure capital is a bailout by the governments involved in LH Group:
- Lufthansa – Germany
- Austrian Airlines – Austria
- SWISS – Switzerland
- Brussels Airlines – Belgium
The negotiations with the German government are now becoming more precise as the Handelsblatt is reporting today.
According to the article Lufthansa has approached the administration with a request for €9 Billion which is in line the amount I estimated on Friday (8-10 Billion). Currently Lufthansa has a value of just €4 Billion and they do own most of their planes.
There is still disagreement however in what form Lufthansa is to receive this aid should it eventually be paid. Multiple options are currently being discussed ranging from the German goverment becoming an active shareholder with decision making powers, payment either as a loan or equity and the question of seats on the board (two seats are being discussed right now).
One thing is certain, Lufthansa simply won’t have the money to pay off a nine Billion Euro loan in the coming years. Lufthansa currently loses one Million Euro per hour as all traffic pretty much ceased.
Another issue is the matter of liabilities against customers and purveyors, especially ticket refunds that are eventually due. While the German government had initially considered allowing Lufthansa to refund money only in the form of vouchers, this idea was quickly shot down by the EU.
As Lufthansa stated last week they currently have roughly 4 Billion Euro cash on hand but this money would be gone pretty much immediately as soon as refunds start to flow.
Yesterday the considerably smaller Air France secured a 7 Billion Euro rescue package from the French Government so the amount discussed here isn’t too large in volume. Nevertheless the German taxpayer can’t just hand Lufthansa the money and let them be merry with it for the foreseeable future. There need to be tough control measures, in the very least government representatives on the board to keep an eye and ear on Lufthansa’s plans.
So far none of the other governments (Austria, Belgium and Switzerland) have given any information about possible bailouts for their respective airlines Austrian, Brussels and SWISS. Each of these carriers will need between 3-5 Billion as well – conservatively speaking.