There’s a lot of debate about whether airlines deserve state aid, and if they do deserve it, what the terms should be.
In Germany you have Lufthansa seeking billions of dollars in state aid. Lufthansa executives argue that the airline can’t survive without aid, while Ryanair’s CEO argues that “Lufthansa is like a crack cocaine junkie looking for state aid.” He argues that Lufthansa wants to go on an airline shopping spree at the expense of taxpayers.
Well, another German airline has just secured aid, and this is a case where I definitely think it was appropriate.
In this post:
Condor received state aid several months ago
Condor is a German leisure airline that used to be owned by Thomas Cook. The airline was profitable and they operated some valuable niche routes (like Frankfurt to Whitehorse), but they were just in the wrong place at the wrong time.
In September 2019 Thomas Cook ceased operations, and that was catastrophic for Condor. Thomas Cook’s failure had nothing to do with Condor, but understandably Condor was facing serious liquidity issues with their parent company liquidating.
At the time the German government had gave 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.
Condor 767-300 cabin
Condor was supposed to be acquired by LOT
Condor was looking for a new owner, and at the beginning of 2020 it was announced that Polish Aviation Group (PGL), the parent company of LOT, would be acquiring Condor.
That looked like it was actually going to happen until COVID-19 came along. The deal was supposed to close in April 2020, and at the very last minute PGL called off the deal, since obviously this isn’t an environment in which any company would want to acquire an airline.
LOT Polish Airlines was supposed to acquire Condor
Condor receives new state aid
To recap up until now:
- Condor was a profitable airline
- They would have gone out of business due to issues with their parent company, so Germany gave them a bridge loan
- Then they were supposed to be taken over, but that was called off due to COVID-19, again leaving the airline pretty helpless
Well, there’s good news on that front. The German government and the Hessian state government have pledged their support for Condor, and this has already been approved by the EU Commission:
- Condor will receive a loan of 294 million EUR
- Condor will receive 256 million EUR to refinance the bridging loan that the airline received after Thomas Cook went out of business
As Condor CEO Ralf Teckentrup describes this development:
“As an operationally healthy and profitable company, Condor has gotten into trouble for the second time in almost half a year through no fault of its own – once by Thomas Cook and then by the effects of the Corona pandemic. We are very grateful to the Federal Government and the Hessian State Government for their support and would also like to thank all our customers, partners, service providers and supporters for their encouragement and trust.
Our employees in particular has surpassed themselves in recent months and have more than fulfilled the trust placed in us. Even though the coming period will be a challenge, especially as an airline, we are confident that through the dedication, commitment and passion of each and every one of them we will continue to fulfill the trust placed in us.”
Condor has secured state aid again
Bottom line
This aid from the German government seems appropriate. Condor was a profitable airline that employed many Germans and offered great fares, and the airline has now been in the wrong place at the wrong time twice due to no fault of their own (first Thomas Cook ceasing operations, and then PGL calling off the acquisition).
I’m happy to see that Condor won’t become a casualty of this situation, at least for now. I’m still curious what the long term plan for survival is, as I hope Lufthansa doesn’t manage to acquire Condor (in which case Ryanair’s CEO would be spot on).
What do you think the path forward looks like for Condor?
@ Klaus:
.... ich meinte eigentlich Ben mit meiner Bemerkung, da Er mit den Eltern als Bub immer nach FL mit CONDOR geflogen ist!
Could Condor shift it's focus to BER (assuming it ever opens), and begin to expand into the space that Air Berlin once held? That airport was to be a connecting hub for them at one point. Could create some healthy competition for LH, hit the price points needed for the growing Berlin market (tech & leisure travel).
Sour grapes, RyanAir ? Nobody loves you? awww...…..
I agree Keeping Condor in the Air
I flew Condor in 2019 & currently hold a Condor ticket for 2020
Combining with Alaska Air would be a dream
Having paid cash to fly Condor business class and having enjoyed the experience I hope they keep flying. Surprisingly one of the best meals I've had on an airplane was on Condor and recently the meals on SQ, QR and TAP have been very meh in comparison.
I love the suggestion that someone different should buy them. I would imagine that the fit between Alaska and Condor would be great for everyone in the Pacific...
Having paid cash to fly Condor business class and having enjoyed the experience I hope they keep flying. Surprisingly one of the best meals I've had on an airplane was on Condor and recently the meals on SQ, QR and TAP have been very meh in comparison.
I love the suggestion that someone different should buy them. I would imagine that the fit between Alaska and Condor would be great for everyone in the Pacific North West. Imagine being able to route to Europe and other destinations (Cape Town?) with an Alaska ticket.
Unfortunately they are probably still struggling with the Virgin America takeover but what an interesting possibility.
Condor was not profitable before. They have just lived off their substance, now they have very old, run down aircraft but no money saved to buy or lease new ones.
@The nice Paul:
No, Europe is totally different than the USA:
Domestic travel:
Airlines in France, Austria, Switzerland, Germany etc. have to compete at least with trains and cars. In some cases, there is also a second airline that flies the same route. Either way, there is no monopoly in the domestic marekt.
Intra Europe:
There are a few routings with only one airline operating. Agreed, some routings actually have no real...
@The nice Paul:
No, Europe is totally different than the USA:
Domestic travel:
Airlines in France, Austria, Switzerland, Germany etc. have to compete at least with trains and cars. In some cases, there is also a second airline that flies the same route. Either way, there is no monopoly in the domestic marekt.
Intra Europe:
There are a few routings with only one airline operating. Agreed, some routings actually have no real competition (Spain to UK is IAG, Germany and Switzerland or Austria is LH (and cars/trains), Germany and the Nordic countries is SAS/LH codeshare). But Condor wouldn`t help here.
International:
More than enough competition from Middle East, Asia, USA etc.
Yes, I would love if Condor would survive. That is why I would love some airline to buy it. I am sorry that LOT doesn`t want them anymore. I do not think that they will survive without being bought by a different airline.
I dont know why tax money should be invested into Condor. It´s not a flag carrier or an essential air service and opposed to what some may think it doesnt compete with Lufthansa on a meaningful scale. It´s a leisure carrier that flies folks to cheap vacation hotspots or the most obscure destinations at the other end of the world. Nothing of that is worth tax payers money.
It just goes to show how...
I dont know why tax money should be invested into Condor. It´s not a flag carrier or an essential air service and opposed to what some may think it doesnt compete with Lufthansa on a meaningful scale. It´s a leisure carrier that flies folks to cheap vacation hotspots or the most obscure destinations at the other end of the world. Nothing of that is worth tax payers money.
It just goes to show how directionless European governments and especially the German government throw money at everyone who asks. And that they can do that because of negative interest rates. What can possibly go wrong here?
I like Condor and am glad they managed to stay to fight another day. My guess is that Condor will be merged with another carrier in the near future I just hope it is a good fit for them. In a weird fantasy world, I'd love to see them merge with some odd airline like LOT or something really weird like Alaska or El Al. Most likely Lufthansa will get its hands on it eventually.
Consolidation is a dead-end (or, maybe, a fast route to shafting the customer)
Consolidation is long overdue
@Steffl:
Yes, I have good memories with Condor as a childhood airline (back then they were owned by Lufthansa) and they still are a good leisure airline. But so were LTU, Hapag Lloyd, Aero Lloyd, Martinair, Lauda Air and Air Berlin (when they were a leisure airline).
But I doubt that Condors business model will be sustainable in the new past-covid environment?
Unfortunately, most leisure and even business travellers want to fly at...
@Steffl:
Yes, I have good memories with Condor as a childhood airline (back then they were owned by Lufthansa) and they still are a good leisure airline. But so were LTU, Hapag Lloyd, Aero Lloyd, Martinair, Lauda Air and Air Berlin (when they were a leisure airline).
But I doubt that Condors business model will be sustainable in the new past-covid environment?
Unfortunately, most leisure and even business travellers want to fly at the lowest cost (FR, EW, U2, W6, HV...) rather than to support traditional airlines with expensive operating costs (= fair salaries).
@Klaus
“a consolidation for European carriers is pending”
Why? You think Europe is the same as the US market, or that a couple of mega-carriers is somehow inevitable?
I’m fed up with companies pursuing monopolistic strategies, eliminating competition, and then when times get tough insisting they’re “too big time fail” and need tax-payers’ money.
Can’t we learn any lessons from the current chaos?
Aren't you glad, to still have your childhood Airline in the air after all? They sure did/do go trough rough times.
@Ben: what’s wrong with Lufthansa buying Condor?
I do not really see a future or a long term plan for Condor otherwise. Since years, a consolidation for European carriers is pending and here it is.
Condor is a leisure airline and I do not see tourism coming back to quickly.
The fact that Lufthansa cancelled all contracts for feeder flights will note make it easier for Condor.
Let’s face it: there...
@Ben: what’s wrong with Lufthansa buying Condor?
I do not really see a future or a long term plan for Condor otherwise. Since years, a consolidation for European carriers is pending and here it is.
Condor is a leisure airline and I do not see tourism coming back to quickly.
The fact that Lufthansa cancelled all contracts for feeder flights will note make it easier for Condor.
Let’s face it: there was and will be enough competition in the German/European market even without Condor.
About O’Leary: He is like a crack cocaine junkie looking for headlines. And he was successful again. Just made it to your headline.
And please differentiate between a government loan for an airline that might soon be bankrupt and a government bond for an airline that one might argue is system relevant.