One of the ways that flag bearers have been able to keep up with the current uncertainties in industry is by achieving state aids. Quite recently, various airlines like US based carriers, Indian airlines and many others reported to have received some significant financial assistance from the government. In a latest development, Austria’s flag bearer, Austrian Airlines, announced that they shall be receiving €600mn (approximately $677mn) in financial aid from the Austrian government and the airline’s parent company, the Lufthansa Group.
Austrian government is reported to have assisted with €150mn in direct state aid. The Lufthansa Group has issued €150mn in an equity capital injection, whereas, Austrian has been lent €300mn through loans, which are to be paid back to banks by 2026. The €600mn total aid is about €167mn less than the initially reported financial aid amount anticipated by the airline.
Chief Executive of the Lufthansa Group, Carsten Spohr, stated in a Press Conference:
‘Austrian Airlines is a fundamental part of the multi-hub strategy pursued by the Lufthansa Group. Thanks to this rescue package, we see ourselves in a position to rebuild the flight hub in Vienna after the crisis and connect Austria with important destinations in Europe and throughout the world.’
In return for the €150mn government aid, the Austrian Government has listed many environmental and ecological requirements that the airline must abide to. Few requirements that were put into place include transforming some short-haul commercial routes to train services, in an attempt to reduce the carbon footprint. The government has targeted 30% reduction in carbon-dioxide emissions by 2030 as compared to 2005. While the transfer of short-haul commercial passenger routes to trains is indeed an interesting topic, Austria is not the first country to think about implementation of this strategy. The exact requirement, terms and conditions are quite vague at the moment.
Another significant part of the pandemic rescue package for Austrian is planned to come from the carrier’s employees. The airline has about 7000 employees, who will make an accumulated contribution of about 300mn Euros by taking salary cuts And furloughs. Moreover, more than 1000 business partners and players in the supply chain of Austrian Airlines are also reported to have planned to make a substantial contribution.
Austrian Airlines CEO, Alexis von Hoensbroech, stated:
‘I am relieved and thankful that we have succeeded together in making Austrian Airlines ready for take-off again. After almost three months on the ground, Austrian Airlines will lift off again and slowly ramp up its flight operations in accordance with international travel guidelines. We look forward to soon welcoming passengers on board our flights once again.’
While it is indeed a big relief to see Austrian Airlines take to the skies again, what would be interesting is to see how they cope with this huge loan in years to come, when air traffic is expected to stay low for a couple more years. However, for now, we can safely say that Austrian has passed the test of time. Long live the airline!
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