MIAMI – If there is one thing we can rely on in aviation, it is that there will always be a long line of characters queuing up waiting to throw their voice into the choir of colorful opinions, some of which can be considered funny, some of them just simply rude, the rest absolutely bonkers.
Yesterday, we at Airways published a piece penned by me looking into the Lufthansa (LH) bailout agreement. The package valued at €9b, which has more strings attached than a Grindr hook up, is aimed to keep the German Giant afloat through the choppy waters of the Covid-19 Pandemic.
Whilst we all have opinions on the state bailing out of airlines, the colorful Chief Executive Officer of Ryanair (FR) is well known for his eloquent way with words. As was to be expected, Mr. O’Leary had a few words of wit and wisdom on the Lufthansa Package.
Mr. O’Leary speaks his mind
Michael O’Leary’s airline has recently been blasted on social media and in the press for being tardy at issuing refunds to many thousands of passengers whose flights were canceled as a result of the Covid-19 pandemic and the tough lockdown measures the vast majority of European Countries imposed.
In a statement, Ryanair’s Group CEO said, “If Lufthansa does not want to hand over slots or give the German Government the effective Board representation they are entitled to in return for a State subsidy of €9b, then Mrs. Merkel should say “buzz off” Lufthansa, and instead reduce air travel taxes for all airlines operating in Germany.
Lufthansa would be the major beneficiary of any such tax reductions, but it would also encourage other airlines, including FR, Laudamotion (OE), and EasyJet (U2), to return to flying and pass on lower fares to consumers.
Lufthansa, asking for too much?
The reduction of these travel taxes to zero for the next 24 months would provide LH with significant funding but would encourage the carrier to return to flying while allowing it to keep its precious slots monopoly at Frankfurt (FRA) and Munich (MUC) Airports, as well as ignoring the German Government Board membership request.
Carsten Spohr has played a blinder during the COVID-19 crisis. He is probably the first man in history to demand €9bn from Mrs. Merkel, then tell her to “buzz off” when she wants Board seats and/or slot remedies.
Not content with demanding money from the German state, he is also demanding money from the Swiss, Austrian, and Belgian Governments as well.
There seems no end to LH’s addiction to State Aid, which will distort competition for air travel to and from Germany for many years to come.
It’s time for Mrs. Merkel to tell Lufthansa to “buzz off” and bring an end to these illegal State Aid demands from the “subsidy junkie” Lufthansa.”
Will Ryanair launch an appeal against the bailout?
It does seem however that the situation Mr. O’Leary described has materialized: as part of the terms of the bailout, LH has been forced to sell slots at both MUC and FRA and indeed allow representatives from the German Government to sit on the LH Board.
Earlier this month, FR was very clear in their intention to launch an appeal against what they branded as “this latest example of illegal state aid to Lufthansa.” Should the deal actually be formalized, I expect we will see much more drama come from the Dublin carrier.
Though FR itself is no stranger to state aid. The low-cost carrier is notorious for running an operation so tight you could call it a bowstring in a storm. In late 2019 Ryanair was ordered to pay back an estimated €8.5m in what was believed to be state aid subsidies at Montpellier Airport (MPL).
In addition, in 2014 there was a case brought against FR, in which it was argued that the subsidies received by the airline at Charleroi and Zweibrücken were illegal.
In the case of Charleroi, FR eventually won the appeal.
To condemn or support state aid for airlines
Ryanair has been a profitable airline for many years, capitalizing on the freedom of movement that the European Union allows all citizens. However, now the storm has hit and changed the world as we know it, forever changing the economics of the situation dramatically.
It is very difficult to expressly condemn or support for state aid or bailout for airlines in general, which are predominantly private businesses in this modern era. Only a handful of airlines are actually state-owned or backed by governments.
If the Lufthansa Group was to fold, it would take 138,000 directly employed staff into unemployment and that does not factor in all the smaller businesses that rely on Lufthansa Group to support their workforce.
Whilst in the peaceful and carefree times a bailout of the scale of the Lufthansa Package would be inconceivable, perhaps the collateral damage of such an empire folding is enough to throw out the rule book.
In response to the crisis, FR confirmed that it will not “request or receive” state aid, but has looked to downsize the airline, cut jobs and close based in an attempt to ride out the storm.
Some reports have suggested air passenger numbers will not return to the 2019 levels until at least 2023.
With IATA being concerned that while the airlines receiving state aid will be able to return to operations in the not too distant future, the tough repayments demanded by the governments will be more damaging for the industry than the crisis itself.
While I personally neither agree nor disagree with the bailout of LH; it is, after all, a very complex and unprecedented situation; however, one thing I think is clear, and that is FR is suffering a touch of the green-eyed monster.