Airlines All Over The World Are Having Success At One Thing – Getting Governments To Give Them Money

It’s not just the $78 billion and more set aside for U.S> aviation in the CARES Act. Airlines around the world are looking to governments to prioritize them, even over public health expenditures, during the current pandemic.

Thai Airways wants a US$2.2 billion bailout they needed tons of government cash even before COVID.

Meanwhile German flag carrier Lufthansa expects to receive $11 billion in government funds, against a current market cap of $4 billion. Perhaps this will give the airline enough money so that they don’t have to steal funds from customers whose flights are cancelled?

The equity injection from the ESF — possibly up to $4 billion — could initially come as a non-voting form of capital dubbed “silent participation”, two of the sources said, adding that some or all could be converted into shares at a later stage.

Roughly $5 billion in loans, 80 percent guaranteed by German state bank KfW, could be part of the package, they said, adding that Austria, Switzerland and Belgium could contribute a combined $1 billion to $1.5 billion.


Copyright: jremes / 123RF Stock Photo

Air France KLM is getting a similarly-sized bailout package from France and the Netherlands.

Norwegian which has already declared four of its subsidiaries bankrupt even after legislation passed making some subsidies available, have loosened bankruptcy rules in ways that could help the airline restructure – requiring less consensus of debt and equity holders on a plan to move forward.


Copyright william87 / 123RF Stock Photo

While there’s no doubt that airlines are struggling in the face of a sudden evaporation of demand for their product, what’s especially striking about this moment is the success airlines are having at the political game given that public health concerns might take budgetary priority – such as prioritizing funds for hospital beds, protective equipment, ventilators (which don’t appear to do much good) but just as importantly for treatments and ultimately vaccine research.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Never let a crisis go to waste – or tax dollar. Most the world’s air carriers are now subsidized. The CEOs that used to hide behind the faux concept of free markets are the recipients of government coffers. Like COVID-19, the shamelessness of the elite is breathtaking as they grab what they can as fast as they can in this monumental orgy of plundering of the public purse. Newtonian Law comes to mind in this, for every action there is an equal and…’ That will be inflation. Stay tuned for act 2.

  2. Good. I want there to be an airline industry when this is over. And I want a commercial aerospace industry to exist as well. #givetheairlineswhatevertheywant

  3. @ Gary — I just hope AV, VS, and A3 are equally successful. I assume our other miles are almost definitely safe.

  4. Ventilators don’t “appear to do much good”? What the f* is this?

    There is a difference between ventilator overuse in many U.S. settings (as acknowledged by the medical community) and ventilators not doing much good (a complete and utter falsehood).

    Bottom line: ventilators save COVID-19 lives.

    Stick to travel please.

  5. Perhaps the reason why airlines around the world have been getting government help is the realization that: 1) airlines are an essential industry to almost every economy; and 2) it is impossible for ANY airline to survive this uniquely horrific crisis that results in an extended period of zero revenue while still having to pay the extraordinarily high fixed costs of the industry. While you seem fine with letting these companies go broke, more thoughtful minds recognize the obvious problems of having this vital industry in bankruptcy.

  6. I don’t really get the point or the surprise here…most of these airlines are flag carriers; in many cases the government is already a significant shareholder (e.g. 51% for Thai, 20% for AF/KLM)…so those governments giving the airlines money is no different than any other shareholder doing so through your beloved free market, which is what you advocate for anyhow…

  7. They really shouldn’t bailout the airlines. There is near a zero chance they don’t all go bankrupt after this even with the free government (our) money.

    The airlines in the USA got bailed out post 9/11 and still the big 3 went bankrupt and restructured.

    Bankruptcy doesn’t mean the airlines will cease operations.

  8. Easy explanation why airlines get preference. Legislators in most countries enjoy special airline perks they wouldn’t want to lose and they need to get back and forth from their home state to the capital, often weekly.

    Airlines are an essential service for the folks who make the rules and spend our money. Not so much for minimum wage workers who might think that other industries are more essential.

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