Due to COVID-19 Financial Struggles... Lufthansa Negotiates Emergency Funding with 4 Countries

by Jeong Hyunjin

Published 26 Apr.2020 06:53(KST)

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Lufthansa, the largest European airline based in Germany, has reportedly been pursuing large-scale financial support from four countries including Germany after suffering operational setbacks due to the COVID-19 pandemic.

According to Bloomberg on the 25th, Lufthansa is negotiating to receive a total of 10 billion euros in support from four countries: Germany, Switzerland, Austria, and Belgium. Lufthansa owns Austrian Airlines of Austria, Brussels Airlines of Belgium, and Swiss International Air Lines of Switzerland.

Lufthansa recorded a loss of 1.2 billion euros in the first quarter due to the impact of COVID-19. Since only about 5% of its aircraft have been operating since mid-last month, losses in the second quarter are expected to be even greater. Accordingly, Lufthansa plans to lay off 10,000 of its 130,000 employees.

German Chancellor Angela Merkel and other key German ministers are expected to hold a meeting early next week to discuss Lufthansa’s support. Within the German government, it is known that there is a high possibility of providing support to prevent Lufthansa, a core company in the aviation industry, from facing a crisis.

The Austrian government is also discussing financial support for Austrian Airlines. Bloomberg, citing sources, reported that short-term financial support amounting to hundreds of millions of euros is on the agenda, and measures including loans, loan guarantees, and direct financial support for losses are being considered.

The Lufthansa labor union has also stated that the company cannot recover without public funds. Lufthansa has reduced working hours for a significant number of employees and applied for the short-time work support scheme provided by the German government.

The German government provides social insurance payments covering up to 60-67% of the wage reduction for the reduced working hours if companies cut working hours by more than 10% to prevent unemployment caused by the COVID-19 crisis.