Crisis in Lufthansa Group: Swiss saved, AUA abandoned?

Things are going haywire in the Lufthansa Group – losses in the billions are currently being suffered. The accustomed freedom to travel, as we know it from before the Corona crisis, seems to be a long way off. Without effective medicines or vaccines, air traffic is threatened with a standstill for further months.

Swiss receives help – under conditions

In view of this situation, the saving of Swiss is being discussed in Switzerland, while in Austria there is still a dispute as to whether and how the AUA (Austrian Airlines) should be helped. As the first airline in the Lufthansa Group, Swiss was promised to be helped. The Swiss Federal Council promised financial support on 8 April 2020. However, this is subject to strict conditions:

– The money must support the Swiss infrastructure,
– may not be flown abroad,
– no dividends may be paid out of it, and
– no profits may flow to the Lufthansa Group until the loan has been repaid.

A state participation in the company is therefore not planned and since it is only a loan, there can be no question of a gift.

Austrian is (still) trembling

In Austria, the situation for AUA looks much worse. AUA was already in a bad position before the Corona crisis, but now it is threatened with going under without financial support. Opinions on financial support for AUA vary widely. At least EUR 800 million would be needed to save the airline. Some voices demand that no support at all be given to AUA, as Austrian taxpayers’ money should only be used to support Austrian companies. Since the Lufthansa Group is a German company and AUA is only a subsidiary of Lufthansa, AUA should receive support from the German government. This approach is not well thought out. AUA employs about 7000 people in Austria and pays its taxes there. In addition, tens of thousands of other jobs in the greater Vienna area are indirectly linked to the airline.

Whether and how financial support for Austrian Airlines can look like will become clear in the next few days, when the Austrian government has dealt with the issue in detail. An important criterion for this decision is likely to be the continued existence of Vienna International Airport as the hub of the Lufthansa Group. According to NZZ reports, the hub is currently being questioned.

What is becoming increasingly clear: Without the urgently needed aid to AUA, Vienna Airport is likely to lose its status as an internationally important and well-connected airport. AUA handles around 43% of passengers at Vienna International Airport and is therefore the airport’s largest customer. Should AUA lose its hub in Vienna or ground completely due to lack of support, this would also have significant financial consequences for the provinces of Vienna and Lower Austria, which each hold a 20% stake in Flughafen Wien AG. It is therefore to be hoped that the political players are aware of this, and above all of the fact that the threat of economic damage would be enormous if the airline would disappear.

 

Swiss and Austrian aircrafts at Vienna Schwechat airport.

 

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