The politics of this one sure is going to be interesting…
In this post:
Condor applies for German state aid
Reuters is reporting that German leisure airline Condor has applied for 200 million EUR in state aid, according to people with knowledge of the matter. The airline confirmed that they have applied for state aid, but haven’t commented on how much aid they’re looking for.
Why is this an interesting story? Because of Poland. And Lufthansa. And politics.
Condor has applied for Germans state aid
LOT is in the process of buying Condor
This is where the story gets interesting. Yes, Condor is a German leisure airline, but at the beginning of the year it was announced that Polish Aviation Group (PGL), the parent company of LOT, would be acquiring Condor. This came after Condor’s parent company, Thomas Cook, ceased operations.
Condor 767
The German government had given Condor a bridge loan to stay in business, since the airline had a sustainable business model but was just in the wrong place at the wrong time.
The thing is, LOT’s takeover of Condor hasn’t yet closed. It’s expected to close in April (or at least until recently was — who knows what the current situation is).
While we don’t know the details of the government aid that Condor is looking for, it does seem a bit strange for the German government to provide aid to an airline that’s in the process of being taken over by what essentially amounts to the Polish government.
LOT Polish Airlines is in the process of taking over Condor
Lufthansa is going to have a field day
Lufthansa is one of those airlines that loves to attack other airlines when it suits their narrative, even if there’s no merit to it. For example, Lufthansa called low cost carriers “irresponsible,” and it’s rather convenient that these airlines also present the biggest threat to Lufthansa’s business.
Just a couple of weeks ago, Lufthansa was arguing that LOT Polish shouldn’t be allowed to take over Condor, since the airline had been given “permanent survival assistance” by the state.
Lufthansa has taken big issue with LOT’s takeover of Condor
That argument didn’t even have anything to do with the current state of airlines, but was more of a general criticism by Lufthansa. Essentially they were unhappy that they weren’t able to take over Condor, because clearly what German consumers wanted was even more of a Lufthansa monopoly. 😉
I can’t even begin to imagine the statement that Lufthansa is about to put out about the prospect of the German government providing aid to an airline that’s in the process of being taken over by a Polish airline that’s government owned.
We obviously don’t yet know the full details of the aid that Condor is seeking. Could Poland at this point walk away from the Condor acquisition without it costing them too much, or are they committed to it?
On the surface this is one instance where I think Lufthansa might not actually be off base. We’ll see…
Bottom line
Condor is seeking state aid from Germany, just shortly before LOT Polish’s takeover of the German leisure airline was supposed to close.
I’ll be curious to see the details of that, and also how Lufthansa responds.
The deal is dead. LOT withdrew today.
@Christian - you nailed it! Lufthansa and Delta have a lot of parallels - they are two carriers who have enjoyed the highest degree of monopoly at almost all of their hubs and are the most anti-competitive airlines in the industry. In fact, on most of their routes, they are the only carrier and fly those routes 3x - 4x daily! And still keep complaining about 'unfair competition' - all the time.
In addition, it...
@Christian - you nailed it! Lufthansa and Delta have a lot of parallels - they are two carriers who have enjoyed the highest degree of monopoly at almost all of their hubs and are the most anti-competitive airlines in the industry. In fact, on most of their routes, they are the only carrier and fly those routes 3x - 4x daily! And still keep complaining about 'unfair competition' - all the time.
In addition, it can be guaranteed that they will scream and resort to cheap tactics whenever any airline starts a flight to any of their hubs. Not to mention those filthy anti-ME3 videos on their website! What an irony both of them are now asking for state aid!
Well, just because Condor will be bought by a Polish company (if that even happens), they will still pay most of their taxes in Germany. Lufthansa is also applying for government aid in Switzerland, Austria and Belgium for their subsidiaries...so why should an eventually bought Condor no be able to receive aid from the German government?
Yes, Delta, who offers by far the best customer experience, is akin to a sociopath. A sociopath is whoever came up with United's Basic Economy restrictions or markets Project Oasis as an upgrade.
Lufthansa is pretty much like Delta in that they despise anything that threatens their increasing control of the market. Fairness, common sense, and rationality are absolute non-factors in their considerations. If they were humans, they'd be sociopaths.
@Max
LOT will probably walk away if they can't get favorable new terms, but I don't see why they wouldn't try renegotiating. You buy stocks when they are low. COVID-19 appears to have peaked in South Korea 2-3 weeks ago (based on the number of daily deaths and new cases) and has been on the decline since. By the time peak summer comes around, it will have long passed through Germany and it will be business as usual. By then we will back to our usual pilot shortage.
@Michal
Renegotiate? LOT will try to get out completely. The only valuable asset of Condor is the brand name. Fleet is way too old and has to be renewed anyway (very costly), and in light of the recent crisis there will be a global surplus of pilots and stewardesses.
LOT is probably just playing hardball and wants to renegotiate the agreement in light of COVID. Their hope is that the German government extends Condor a lifeline and that the deal can be postponed a couple of months. The problem for Condor is that no one else is about to buy them in this environment, so it's either come to a deal with LOT or risk collapse. LOT has a pretty good bargaining position.
According to German Spiegel Magazine the Condor & PGL deal is quasi dead. It is reported that PGL seems to try to get out of the deal by requesting guarantees from the German government that essentially would transfer any risk from PGL to the German Government.
https://www.spiegel.de/wirtschaft/unternehmen/corona-krise-condor-rettung-steht-vor-dem-aus-a-bfe16484-1c6f-4c59-8e51-53f0dd4d5bbd-amp
It's not a sale until it's finalised.
Until then it's a German Company.
The airline will remain German, it’s just that its shareholder will be from Poland. So what’s the issue, especially since the transfer of shares hasn’t taken place yet?
You missed the headline "Condor Calls for Aid!"