Germany Mulls Emergency Aid for Thomas Cook’s Condor Airline

(Bloomberg) -- German authorities are considering emergency financial aid for Thomas Cook Group Plc’s Condor subsidiary as Deutsche Lufthansa AG remains tight-lipped on the fate of a unit it bid for earlier this year.

Germany’s Economy Ministry on Monday said it’s urgently assessing Condor Flugdienst GmbH’s request for a bridge loan after Thomas Cook collapsed under a pile of debt. The state of Hesse, where Condor’s base at Frankfurt Airport is located, is ready to help with a loan guarantee and is already in talks with the airline and the federal government, Premier Volker Bouffier said.

“Condor is in a difficult situation thanks to its British parent Thomas Cook,” Bouffier said in a statement. “Both are victims of Brexit, which has created uncertainty among companies and its customers.”

The federal government in 2017 made a similar loan to Air Berlin Plc to keep the airline flying while Lufthansa considered taking it over. The European Union Commission may also have to sign off on potential aid, a government spokesman said. Lufthansa earlier this year bid for Condor but in June said the offer would likely be rejected.

“The federal government is examining the application,” an economy ministry spokesman said in an emailed statement. A spokesman for Lufthansa declined to comment on Thomas Cook’s bankruptcy.

European airlines are struggling to turn a profit due to the surplus of seats on tourist and business routes. Despite the demise of Air Berlin, Monarch, Wow and several other airlines since the end of 2017, too many planes are still flying to too many places.

“All Condor flights are taking off as planned today, and we will do everything within our means so that our fleet can continue to take our guests to their holiday destinations and back,” Condor Chief Executive Ralf Teckentrup said in a statement. About 240,000 of the airline’s customers are currently abroad, he said, adding that tickets sales are working without restrictions.

Authorities came under increasing pressure to act on Monday, as labor groups and industry associations weighed in. Germany’s UFO cabin personnel union said Condor is a profitable company that “deserves a chance at survival,” a position echoed by unions representing the pilots and ground staff, as well as the country’s airport association ADV.

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“We very much hope that the decision makers in the federal government and in Hesse look closely at the situation and contribute to make this happen,” UFO head Sylvia De la Cruz said in a statement.

While a spokesman for Lufthansa on Monday wouldn’t reveal details of its earlier bid, the airline is unlikely to be interested in the company’s medium- and long-haul jets, which are mostly older than its own. Condor’s slots would be valuable to Lufthansa, although Chief Financial Officer Ulrik Svensson in June said an integration with its low-cost unit Eurowings would be “complex”.

That complexity could prove insurmountable as the Cologne-based airline has issued profit warnings and is under pressure from investors to turn Eurowings around after years of underperformance. Investors have also lambasted management for its costly integration of the Air Berlin jets.

One option for Lufthansa would be to wait for Condor to go bust and then acquire the airline’s slots from airport operators. The Condor brand would likely also be of value, as the airline is popular with German travelers.

Main Battleground

Thomas Cook flew German customers with three different airlines. All three remain airborne for the time being, meaning just over half of the company’s 105 aircraft are still flying. Lufthansa owned Condor before selling the unit to Thomas Cook a decade ago.

Germany’s aviation market is one of the main battlegrounds in a Europe-wide fare war to gain market share. Ryanair Holdings Plc and Easyjet Plc rushed into a vacuum created by the collapse of Air Berlin, forcing Lufthansa into a price war in which the firm’s Eurowings subsidiary has lost hundreds of millions of euros.

This summer has seen heated competition on holiday routes to western Mediterranean destinations such as Spain, after Ryanair added a plethora of flights from Lufthansa’s main Frankfurt hub to the Iberian peninsula.

©2019 Bloomberg L.P.

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