Aviation industry Corona isn’t the only problem

Status: 06/18/2021 6:46 a.m.

Aviation has been hit particularly hard by the Corona crisis. But the industry is also under pressure when it comes to climate protection. Will the change now succeed?

From Michael Immel, ARD aviation expert

The mood in the aviation industry has brightened. Because quite a few planes are filling up again, and many people are looking forward to their summer vacation. And so bookings are going through the roof almost everywhere these days: Lufthansa, Eurowings and Condor – all are experiencing a huge summer trend.

Will the first be the last?

The “National Aviation Conference”, which today is attended by top representatives from politics, business and trade unions at Berlin-Brandenburg Airport, wants to continue this positive trend. But it won’t be easy. Even if capacity utilization is now increasing sharply: over the year as a whole, the aviation industry will probably only end up at 40 to 50 percent of the pre-crisis level. Lufthansa boss Carsten Spohr had already stated last spring: “We were the first industry to be affected by this global crisis and aviation will be one of the last to leave it.”

Remove travel restrictions

In the joint declaration on the aviation conference to be signed in Berlin today, it is therefore stated: “After around 15 months of almost total standstill, the German air transport system is suffering from massive economic losses. Therefore, further decisions and measures are necessary to revive air traffic to support.”

It is primarily about travel restrictions that are to be lifted gradually. And to simplify travel, in particular through a digital vaccination certificate for proof of vaccination, recovery and test results. This should accelerate the processes at the airports.

Successful and sustainable

In the nine-page paper that tagesschau.de is available, the main focus is on a green strategy for the German aviation industry. The revival should be based entirely on sustainability. Climate protection, eco-efficiency and sustainable competitiveness: These are the future topics for the entire industry – which has also understood that lip service alone will not be enough in the future.

“An essential instrument for climate protection in air traffic is the rapid and continuous renewal of the aircraft fleets”, it says in the Berlin declaration. New commercial aircraft would emit up to 25 percent less CO2 than the previous generation. With the collapse of air traffic, however, the renewal of the fleet has largely come to a standstill. “That is why the federal government has initiated a funding program to provide an economic incentive for the fleet renewal. We are continuing to advocate for the rapid approval of the program under state aid law during this legislative period.”

Criticism from unions

Meanwhile, in the run-up to the aviation conference, there is massive criticism from unions. According to the ver.di survey, 16 percent of the workforce have left air transport since the beginning of the pandemic. “The numbers of downsizing are frightening,” said Mira Neumaier, ver.di federal specialist group leader for aviation, who is also taking part in the aviation conference today.

“In view of the extremely thin workforce even before the start of the pandemic and the great stress situation for the employees, it is to be feared that a regulated restart in air traffic – even at 50 percent of the pre-crisis level – will no longer be affordable.”

Securing jobs

“It is not enough to save corporations,” warns Stefan Herth, president of the cockpit pilots’ union. “The short-time work allowance was an important measure in the acute crisis. What we now need is the sustainable safeguarding of jobs. In the past year and a half, politics has shown too little commitment here,” said Herth.

As a major shareholder, the federal government also has the responsibility not to lose sight of the well-being of employees when making important business decisions. “Wage dumping and social cuts at state expense must not be accepted anywhere.”

Lufthansa rescue package Paybacks before the election?

Status: 06/18/2021 12:37 p.m.

The low point of the crisis has been overcome for Lufthansa, said CEO Spohr a few days ago. He hopes to be able to repay the state aid quickly – if possible, before the general election. According to CEO Carsten Spohr, Lufthansa wants to repay the billions in financial aid from the state in the corona crisis in a few months. “We were one of the first companies that was saved by the federal government. We also want to be one of the first companies to pay back the rescue funds – hopefully before the federal election,” he said in an interview with Chancellor Angela Merkel at the National Aviation Conference. The election date is September 26th. Germany, Austria, Belgium and Switzerland had pledged nine billion euros in government aid to the group last year due to the collapse in business caused by the pandemic, thus saving it from ruin.

“Low point is behind us”

The group had started preparations this week for a capital increase with which the aid could be paid. “We are switching from crisis mode to transformation mode,” said Spohr. The planned capital increase is an important step towards withdrawing from state financial aid.

Since April, the booking situation has improved significantly due to falling Covid infection numbers, progress in vaccination and the introduction of the digital vaccination pass in the EU. “The low point of the crisis is behind us,” said Spohr. “We’re not back to normal, but now is the time to look ahead with confidence.”

Airline in crisis Lufthansa wants to get rid of state influence

Status: 15.06.2021 9.45 a.m.

The largest German airline wants to raise additional money on the capital market for its realignment. In doing so, the group is trying to reduce the federal government’s ability to influence as quickly as possible. Lufthansa has initiated its planned capital increase. According to a mandatory announcement yesterday evening, the aviation group mandated four banks to implement the measure. However, according to the announcement “The Management Board and the Supervisory Board have not yet made a decision on the scope and timing of a possible capital increase”. Companies raise capital by issuing additional shares; the shares of the existing shareholders are thus diluted. The company is now implementing the approval of the shareholders received at the general meeting in May. The airline is allowed to raise up to 5.5 billion euros in fresh capital on the capital market. According to media reports, the management initially only wants to mobilize around three billion euros in order to push ahead with the restructuring of the company.

Exclusive 06/01/2021

Billion dollar rescue package

Lufthansa also wants to reduce the influence of the state through the capital increase. Lufthansa was in dire straits due to the Corona crisis and had to be supported by Germany and its other locations with a financial framework of nine billion euros. Germany accounted for a total of 6.8 billion euros of the state rescue package for Lufthansa. However, the airline group only made use of around two billion euros of the guaranteed funds. Half of this has already been repaid with the money from new bonds, so that Lufthansa currently owes the state around one billion euros. A capital increase of three billion euros would enable the company to repay this amount earlier than previously planned. The state would then soon have to sell its block of shares, for which it paid around 300 million euros.

Group wants to drastically reduce costs

With the withdrawal of the state participation, Lufthansa would have more leeway again. Because in return for state aid, the company has to adhere to various conditions: for example, a ban on paying dividends to shareholders or distributing interest to bond owners. Bonus payments to managers are also not yet possible. So far, the plan was not to pay off the state aid until 2023. Even drastic cost savings are probably easier to implement without government influence. According to earlier information, Lufthansa wants to reduce the number of employees in Germany by another 10,000 to 100,000. To this end, Lufthansa wants to lower tariff standards, encourage employees to leave the company voluntarily, but also issue redundancies for operational reasons. The unions had already made concessions in the Corona crisis, but recently accused Lufthansa of evading tariffs.

The approval of the state fund is still pending

The federal government’s economic stabilization fund (WSF), which has a 20 percent stake in Lufthansa, is expected to participate in the capital increase – but without spending additional taxpayers’ money on it. The WSF still has to approve the plan, said Lufthansa. The Corona financial aid fund wants to participate in the capital increase with a so-called “Operation Blanche”. A shareholder sells part of his subscription rights for the new shares in order to exercise the remaining subscription rights with the proceeds. No additional tax revenue is required for this transaction. The MDAX company also announced a new profit target for 2024 in the evening. By then, experts estimate that aviation should return to pre-crisis levels. The adjusted operating margin, i.e. the ratio of operating profit to sales, should then reach at least eight percent, and the return on investment should be at least ten percent.