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Thomas Cook collapse: Germany’s Condor to keep flying with state loan

German charter airline Condor, a subsidiary of bankrupt British tour operator Thomas Cook, said Tuesday it had been granted a €380 million state bridging loan.

Published: 25 September 2019 09:09 CEST

Thomas Cook collapse: Germany's Condor to keep flying with state loan

A Condor Airbus A330 in Frankfurt in November 2018. Photo: DPA

The holiday airline founded in 1956 operates 58 aircraft, has 4,900 staff and flies about eight million passengers a year from eight German cities to over 100 destinations in Europe, Africa and North America.

The carrier reported a day earlier that it had applied for a state-guaranteed bridging loan with the German federal government and the Hesse state government.

READ ALSO: Germany's Condor seeks government aid to keep flying

It then confirmed late Tuesday it had “received a guarantee from the federal government and the state government of Hesse for a six-month bridging loan of €380 million”.

The money could be disbursed after agreement from the European Commission,
it said, adding that “it is not yet possible to say when the decision from Brussels will be known”.

Condor said the bridging loan was meant “to prevent possible liquidity bottlenecks at Condor resulting from the insolvency of the English Condor parent company Thomas Cook Group”.

“Condor is an operationally healthy and profitable company, which will also record a positive result in the current year,” chairman Ralf Teckentrup said in a statement.

“This commitment is an important step towards securing our future.”

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EU authorises €4 billion bailout of Air France, despite Ryanair's objections

Photo: Kenzo Tribaullard/AFP

The agreement follows weeks of negotiations with the EU commission, which must ensure that state aid does not give companies an unfair advantage.

Air France posted a €7.1 billion loss in 2020 as its business, like that of the rest of the world’s airlines, suffered from coronavirus restrictions which all but grounded global air traffic.

In return for its green light, the commission, which is the EU’s anti-trust regulator, said Air France would relinquish about 18 slots per day at Orly, Paris’ second-largest airport after Charles de Gaulle.

“This gives competing carriers the chance to expand their activities at this airport, ensuring fair prices and increased choice for European consumers,” EU competition commissioner Margrethe Vestager said.

French Finance Minister Bruno Le Maire said the EU had also allowed the French state to raise its stake in Air France-KLM group to 30 percent, up from the current 14.3 percent.

The Netherlands’ flag-carrier KLM, which forms an alliance with Air France, will not benefit from the aid.

Nevertheless, the Dutch government welcomed the approval of additional aid.

In a joint statement Le Maire and his Dutch counterpart Wopke Hoekstra said a recapitalisation of KLM by the government of the Netherlands was being looked at.

The recapitalisation of Air France will take place by converting loans it received from the French state last year into perpetual hybrid Air France-KLM bonds that can be converted into equity.

Shares in Air France-KLM fell by 1.4 percent in Amsterdam and 1.6 percent in Paris, while both markets were trading higher.

Independent aviation analyst John Strickland told AFP that “competitors will not be happy and it is important to see that the proposed slot remedy at Orly has real meaning in terms of facilitating additional competing services.”

Rival airline Ryanair, whose criticism of state subsidy for legacy airlines often finds a sympathetic ear at the European Commission, has lambasted previous French aid for Air France, saying it distorts competition.

The Irish-based low-cost carrier has long railed against the support given to national champions, and is often backed by Brussels.

Ryanair — Europe’s biggest airline in terms of ridership — is also seeking to challenge Germany’s massive bailout of Lufthansa in the EU courts as well as schemes in Spain, the Netherlands, Denmark and Portugal.

The French and Dutch ministers defended their support for their airline group.

“The connectivity of France and the Netherlands is of great importance for both economies and therefore the recovery of the Air France – KLM Group is in the best interest of the two states,” they said in their statement.

They also noted that the airlines have restructured to shore up their financial positions and made commitments to accelerate their transition towards environmental sustainability.

“It’s not surprising to see further government investment in Air France but the key question is whether it will lead to attempts to impose political direction on the group’s management beyond their commercial objectives,” said Strickland.

The ministers said France does not intend to raise its stake in the group any higher and that there are no plans to nationalise the respective airlines.

European airlines are hoping vaccination campaigns will pick up pace to allow for a resumption of travel ahead of the summer vacation season, which is when they traditionally make most of their money, to help them recover financially.

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