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strfyr51
Posts: 4980
Joined: Tue Apr 10, 2012 5:04 pm

Re:

Tue Apr 28, 2020 5:49 pm

Waterbomber2 wrote:
Lease contracts may not provide relief for the situation, but the problem is that if airlines declare insolvency, lessors become just another creditor among a long list of creditors.
So lease contracts can be renegotiated. Payments can be reduced for the duration of the grounding in exchange for a lease term extension for the same duration as the grounding.
Lessors will make concessions, because technically aircraft are not building hours or cycles and are being stored, and going the legal route is not in their interest.
Plus, there is potential for making extra money out of the deals over the term of the aircraft's life.
As written in another thread, if lessors taker an aggressive stance, refuse concessions and repossess their aircraft assets, they may need to revalue them in their balance sheets and this could technically bankrupt them too considering the tanking values of aircraft.

Same for debt with aircraft as collateral.
Airlines will have to negotiate with banks to extend the term of their repayments, offering to for instance only to pay interests and resume principal payments as soon as the grounding is lifted.

So Tomcat is right, this has to be taken step by step.


Airlines can and should hence be able to mitigate 85% to 90% of their expenses.
So if the LH Group has 30 billion in annual expenses, they should be able to reduce them to 3-4.5 Billion EUR per year.
This is well within the scope of commercial loans.
Also, since the length of the grounding is unknown, this should be done in tranches of one or two quarters, not a ridiculous 2 to 3-year package.

So yes to giving them a bailout in the form of loans, but under court supervision (insolvency procedures) after they burn through all their own money, in tranches of 2 billions and only based on invoiced amounts.

Same for AF-KLM and IAG if they seek out bailouts.



As written in another thread, if lessors taker an aggressive stance, refuse concessions and repossess their aircraft assets, they may need to revalue them in their balance sheets and this could technically bankrupt them too considering the tanking values of aircraft.
having put aircraft into and removed from storage? the leasing companies might do well to just roll with the punches during this current difficulty. If they do not hold their own Maintenance certificate? Then they're going to need the current Leasee's certificate to prove their airplanes are in compliance. I've seen Lessors make some damn stupid mistakes in getting airplanes returned after the lease was ended acrimoniously. I've seen Lessors get airplanes back and have 2 engines sitting on the ground in stands rather than mounted on the wing and the APU behind the airplane all because of the way they approached the lease return. I've also seen Lessors PAY the previous airline to keep the airplanes on their Maintenance certificate to ease the transition to the next lease. getting all hot and bothered in this crisis?
Might well relegate your assets to some world class "shithole" airline who's maintenance? Is just next to NONE!!
 
devron
Posts: 365
Joined: Wed Apr 20, 2011 11:56 am

Re: Re:

Tue Apr 28, 2020 6:02 pm

Waterbomber2 wrote:
Kurzarbeit is already a huge subsidy that LH is receiving.


No it`s an insurance I have been paying (as employee in germany) and LH employees (and LH it self) has been paying. Would be like saying health insurance LH employees get is subsidy. It is just and compulsory insurance like healthcare (like car insurance in Germany btw)

Back on track I really do not like all the individuel airliners in the EU getting a national bailout the EU should decide based on a set of objective criteria which airliners get a bailout. Criteria could be unique routes, crical routes (e.g. business travel more importent then tourism), medical supplytransport, ect..
 
Waterbomber2
Topic Author
Posts: 1288
Joined: Mon Feb 04, 2019 3:44 am

Re: Re:

Tue Apr 28, 2020 6:31 pm

strfyr51 wrote:
Waterbomber2 wrote:
Lease contracts may not provide relief for the situation, but the problem is that if airlines declare insolvency, lessors become just another creditor among a long list of creditors.
So lease contracts can be renegotiated. Payments can be reduced for the duration of the grounding in exchange for a lease term extension for the same duration as the grounding.
Lessors will make concessions, because technically aircraft are not building hours or cycles and are being stored, and going the legal route is not in their interest.
Plus, there is potential for making extra money out of the deals over the term of the aircraft's life.
As written in another thread, if lessors taker an aggressive stance, refuse concessions and repossess their aircraft assets, they may need to revalue them in their balance sheets and this could technically bankrupt them too considering the tanking values of aircraft.

Same for debt with aircraft as collateral.
Airlines will have to negotiate with banks to extend the term of their repayments, offering to for instance only to pay interests and resume principal payments as soon as the grounding is lifted.

So Tomcat is right, this has to be taken step by step.


Airlines can and should hence be able to mitigate 85% to 90% of their expenses.
So if the LH Group has 30 billion in annual expenses, they should be able to reduce them to 3-4.5 Billion EUR per year.
This is well within the scope of commercial loans.
Also, since the length of the grounding is unknown, this should be done in tranches of one or two quarters, not a ridiculous 2 to 3-year package.

So yes to giving them a bailout in the form of loans, but under court supervision (insolvency procedures) after they burn through all their own money, in tranches of 2 billions and only based on invoiced amounts.

Same for AF-KLM and IAG if they seek out bailouts.



As written in another thread, if lessors taker an aggressive stance, refuse concessions and repossess their aircraft assets, they may need to revalue them in their balance sheets and this could technically bankrupt them too considering the tanking values of aircraft.
having put aircraft into and removed from storage? the leasing companies might do well to just roll with the punches during this current difficulty. If they do not hold their own Maintenance certificate? Then they're going to need the current Leasee's certificate to prove their airplanes are in compliance. I've seen Lessors make some damn stupid mistakes in getting airplanes returned after the lease was ended acrimoniously. I've seen Lessors get airplanes back and have 2 engines sitting on the ground in stands rather than mounted on the wing and the APU behind the airplane all because of the way they approached the lease return. I've also seen Lessors PAY the previous airline to keep the airplanes on their Maintenance certificate to ease the transition to the next lease. getting all hot and bothered in this crisis?
Might well relegate your assets to some world class "shithole" airline who's maintenance? Is just next to NONE!!


Exactly, proves my point that lessors will have no choice but to make concessions to reduce the burden on all airlines.

The most obvious is to extend the lease terms by the duration of the grounding against reducing the lease during the grounding by 50-90%.

Some here are saying that LH should get a lot of money because they need to keep paying full rate leases, which is ridiculous.
 
SQ325
Posts: 1305
Joined: Wed Jul 18, 2001 7:54 pm

Re: Re:

Tue Apr 28, 2020 6:33 pm

devron wrote:



Back on track I really do not like all the individuel airliners in the EU getting a national bailout the EU should decide based on a set of objective criteria which airliners get a bailout. Criteria could be unique routes, crical routes (e.g. business travel more importent then tourism), medical supplytransport, ect..


Europe is a total joke in this crisis. At the end of the day every country made its own regualtions and rules to shut down. Now everybody makes his own thing in reopening.
In general i see a strong tendency back to more national decision making than collective EU decisions.

For Germany or in general the western European countries there was one question to be answered.
Are we supporting those who pay and threat their employees well and pay their taxes at home which are LH,AF/KLM,IAG or TUI etc. or are we letting the Ryanairs and Wizzairs of this world get control of European aviation?
btw i think in the last 10 years FR received more subsidies /benefits than the 9MRD € that are being discussed for the LH Group
 
User avatar
Executor
Posts: 11
Joined: Thu Aug 09, 2018 7:23 pm

Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Tue Apr 28, 2020 6:40 pm

fraT wrote:
In the end there will most probably a middle way, something Mrs Merkel is known for.


That is probably a good assumption. I see C. Spohr's comments mainly as a negotiating tool to agree finally on a middle ground.
 
fraT
Posts: 1174
Joined: Wed Oct 01, 2003 4:32 am

Re: Re:

Tue Apr 28, 2020 6:44 pm

SQ325 wrote:
devron wrote:



Back on track I really do not like all the individuel airliners in the EU getting a national bailout the EU should decide based on a set of objective criteria which airliners get a bailout. Criteria could be unique routes, crical routes (e.g. business travel more importent then tourism), medical supplytransport, ect..


Europe is a total joke in this crisis. At the end of the day every country made its own regualtions and rules to shut down. Now everybody makes his own thing in reopening.
In general i see a strong tendency back to more national decision making than collective EU decisions.



How should that work in Europe when it doesn't work within a federal country? It's not working in the U.S., it's not working within Germany so in this case I don't agree with blaming the EU. That does not mean that I think the EU is doing a good job in this crisis.
 
Waterbomber2
Topic Author
Posts: 1288
Joined: Mon Feb 04, 2019 3:44 am

Re: Re:

Tue Apr 28, 2020 6:48 pm

devron wrote:
Waterbomber2 wrote:
Kurzarbeit is already a huge subsidy that LH is receiving.


No it`s an insurance I have been paying (as employee in germany) and LH employees (and LH it self) has been paying. Would be like saying health insurance LH employees get is subsidy. It is just and compulsory insurance like healthcare (like car insurance in Germany btw)

Back on track I really do not like all the individuel airliners in the EU getting a national bailout the EU should decide based on a set of objective criteria which airliners get a bailout. Criteria could be unique routes, crical routes (e.g. business travel more importent then tourism), medical supplytransport, ect..


Yes and no.
Yes, we pay social contributions as a form of insurance, just in case despite our best efforts, we may get sick, injured or lose our jobs.

No, we don't pay social contributions so that big corporations can keep minimal liquidity and pay out all their earnings as bonusses and dividends or reinvest them to gain market dominance (aheum Eurowings) at the expense of competition, knowing that if they run out of money, they can put all their employees on Kurzarbeit/job retention programs/temporary welfare.

If used in the second way, and the government does not punish them for such behavior but rather rewards them with a huge additional bailout package, even the Kurzarbeit becomes a subsidising scheme.

It's not only about what it covers (temporary furlough), but also why (company not managed as good house father) this social measure needs to be enacted.

If LH had saved a good part of their profits or paid off debts using the earnings, (which both also create shareholder value) as a good housefather would do, and despite those efforts still run out of money, then Kurzarbeit would not be a subsidy but what it really is meant to be, ie a social insurance.

Basically, it's a matter of risk and premium, as in any insurance. If social insurance is used for a high-risk trading environment at the same level of coverage and premium as a normal-risk trading environment, it becomes a subsidy.
For instance, many health insurances do not cover ski accidents, bungee jumping, or even general aviation flights. Heck, in many countries they don't even cover a pilot losing his job after losing his license or medical.

Kurzarbeit is not a subsidy for a company that has converted earnings into sufficient liquidity and hence requires no additional state aid during a rainy day, or even a storm like this one.
Example, Daimler AG haven't done great lately, but are not begging for state aid and are prepared to burn through their own cash to weather this crisis:

The most vulnerable of Germany’s major automakers, Mercedes-Benz’s parent company Daimler, has insisted it will not need a Government bailout to survive the Coronavirus/Covid-19 shutdown crisis.

https://www.forbes.com/sites/michaeltay ... d-daimler/
Last edited by Waterbomber2 on Tue Apr 28, 2020 7:18 pm, edited 4 times in total.
 
MIflyer12
Posts: 8043
Joined: Mon Feb 18, 2013 11:58 pm

Re: Re:

Tue Apr 28, 2020 7:10 pm

devron wrote:
Back on track I really do not like all the individuel airliners in the EU getting a national bailout the EU should decide based on a set of objective criteria which airliners get a bailout. Criteria could be unique routes, crical routes (e.g. business travel more importent then tourism), medical supplytransport, ect..


Sorry, but when did the EU last do quick & big? It took the EU seven years to negotiate a trade agreement with Canada. That's not because Canadians are incompetent or obdurate. https://www.bbc.com/news/world-europe-37814884
 
User avatar
Terrier79
Posts: 76
Joined: Sat Feb 02, 2019 11:44 am

Re: Re:

Tue Apr 28, 2020 7:18 pm

Waterbomber2 wrote:
devron wrote:
Waterbomber2 wrote:
Kurzarbeit is already a huge subsidy that LH is receiving.


No it`s an insurance I have been paying (as employee in germany) and LH employees (and LH it self) has been paying. [...]


Yes and no.
Yes, we pay social contributions as a form of insurance, just in case despite our best efforts, we may get sick, injured or lose our jobs.

No, we don't pay social contributions so that big corporations can keep minimal liquidity and pay out all their earnings as bonusses and dividends or reinvest them to gain market dominance (aheum Eurowings) at the expense of competition, knowing that if they run out of money, they can put all their employees on Kurzarbeit/job retention programs/temporary welfare.

If used in the second way, and the government does not punish them for such behavior but rather rewards them with a huge additional bailout package, even the Kurzarbeit becomes a subsidising scheme.

It's not only about what it covers (temporary furlough), but also why (company not managed as good house father) this social measure needs to be enacted.

If LH had saved a good part of their profits or paid off debts using the earnings, (which both also create shareholder value) as a good housefather would do, and despite those efforts still run out of money, then Kurzarbeit would not be a subsidy but what it really is meant to be, ie a social insurance.


If you want to educate yourself in German social law, especially "Kurzarbeit", please refer to https://www.gesetze-im-internet.de/sgb_3/__95.html and https://www.gesetze-im-internet.de/sgb_3/__96.html
The regulations when a company is entitled are clearly defined and not only since the Corona crisis. In short: A company is entitled to "Kurzarbeitergeld" if there is lack of work, which is unavoidable, temporary, a result of force majeure and more than a third of the employees are more than 10% short of work. So it is absolutely incorrect and false to state that a company is only entitled to Kurarbeit if it runs out of cash. Please accept that fact and stop creating your own truth.

It has also absolutely zero to do with what companies do with their earning in good times. It is the absolute right of any company to invest, to increase their cash reserves, but also to pay dividends to their shareholders and bonuses to their employees if they had made a good profit.

An open word. It really annoys me reading all this wrong information you spread here out of motives I can only suspect. It's okay to have an opinion, but you continuously and intentionally spread false facts. This is - just as in the other bashing thread regarding SN Brussels you opened today where I decided not to contribute because it's just wasted time - a case for the moderators and I hope they will finally step in.
 
devron
Posts: 365
Joined: Wed Apr 20, 2011 11:56 am

Re: Re:

Tue Apr 28, 2020 7:22 pm

MIflyer12 wrote:
devron wrote:
Back on track I really do not like all the individuel airliners in the EU getting a national bailout the EU should decide based on a set of objective criteria which airliners get a bailout. Criteria could be unique routes, crical routes (e.g. business travel more importent then tourism), medical supplytransport, ect..


Sorry, but when did the EU last do quick & big? It took the EU seven years to negotiate a trade agreement with Canada. That's not because Canadians are incompetent or obdurate. https://www.bbc.com/news/world-europe-37814884


There were several comments that EU ain`t fast, not effective enough, and to national.

I agree (btw just read the ongoign KLM vs. Air France saga). I was just stipulating an ideal plan I do not expect it to happen.
 
NYCVIE
Posts: 281
Joined: Mon Jul 04, 2016 11:01 pm

Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Tue Apr 28, 2020 7:26 pm

Waterbomber2 wrote:
Pandora's box has been opened.
Now any country can participate in their favorite airline to whatever extent they deem suitable to sustain domestic jobs in a post-pandemic world.

Back to the 1960's indeed.
This will totally reshape the market.

The big players will be loaded with debt, new players will pop up all over the place, propulsed by state funds.

If you think about it, the competition rules benefited big players as they allowed to maintain a status quo and avoid competing with entire national budgets.

After this, LH, Germany or the EU can't say anything to any country or regional government wanting to prop up a national or even a foreign airline, because they will have to answer a tough question: How much susbsidies did Lufthansa get in 2020, just after announcing record revenues for the previous year?


TAP should ask for 20 billions, Iberia for 40 billions, AZ 50 billions.


Is there just a recent very vocal anti-LH influx onto this forum? It is strange because other governments have already agreed to provide funding to their carriers - AF/KL/SK/Condor/now LH. This is the worst crisis to ever hit the aviation industry yet some of you are still shocked and confused that there would be state aid because of this massive unforeseen circumstance?

Again, you continue to ignore that the airlines that were forced bankrupt by the EU were receiving ILLEGAL subsidies - capital infusions with no expectation they would pay them back. In a wild world, if TP were to ask for 20 BILLION euros, this would probably also be an illegal subsidy. In what world would TP be able to pay back a 20 billion euro loan... with interest?

You keep saying "just sell the planes" - what airline do you know of that is in the market for any aircraft at the moment, let alone the planes LH actually owns such as 747s? "Default on the leases because the leasing companies do not have a choice" - these companies also have their own financial obligations.
 
Waterbomber2
Topic Author
Posts: 1288
Joined: Mon Feb 04, 2019 3:44 am

Re: Re:

Tue Apr 28, 2020 7:39 pm

Terrier79 wrote:
Waterbomber2 wrote:
devron wrote:

No it`s an insurance I have been paying (as employee in germany) and LH employees (and LH it self) has been paying. [...]


Yes and no.
Yes, we pay social contributions as a form of insurance, just in case despite our best efforts, we may get sick, injured or lose our jobs.

No, we don't pay social contributions so that big corporations can keep minimal liquidity and pay out all their earnings as bonusses and dividends or reinvest them to gain market dominance (aheum Eurowings) at the expense of competition, knowing that if they run out of money, they can put all their employees on Kurzarbeit/job retention programs/temporary welfare.

If used in the second way, and the government does not punish them for such behavior but rather rewards them with a huge additional bailout package, even the Kurzarbeit becomes a subsidising scheme.

It's not only about what it covers (temporary furlough), but also why (company not managed as good house father) this social measure needs to be enacted.

If LH had saved a good part of their profits or paid off debts using the earnings, (which both also create shareholder value) as a good housefather would do, and despite those efforts still run out of money, then Kurzarbeit would not be a subsidy but what it really is meant to be, ie a social insurance.


If you want to educate yourself in German social law, especially "Kurzarbeit", please refer to https://www.gesetze-im-internet.de/sgb_3/__95.html and https://www.gesetze-im-internet.de/sgb_3/__96.html
The regulations when a company is entitled are clearly defined and not only since the Corona crisis. In short: A company is entitled to "Kurzarbeitergeld" if there is lack of work, which is unavoidable, temporary, a result of force majeure and more than a third of the employees are more than 10% short of work. So it is absolutely incorrect and false to state that a company is only entitled to Kurarbeit if it runs out of cash. Please accept that fact and stop creating your own truth.

It has also absolutely zero to do with what companies do with their earning in good times. It is the absolute right of any company to invest, to increase their cash reserves, but also to pay dividends to their shareholders and bonuses to their employees if they had made a good profit.

An open word. It really annoys me reading all this wrong information you spread here out of motives I can only suspect. It's okay to have an opinion, but you continuously and intentionally spread false facts. This is - just as in the other bashing thread regarding SN Brussels you opened today where I decided not to contribute because it's just wasted time - a case for the moderators and I hope they will finally step in.


I can educate you with one question.
Are the social contributions you and your employer pay sufficient to cover your lifetime costs of health insurance, social pension, (temporary) unemployment?

In most cases the answer will be no and remember that the system supports a lot of sick, injured, disabled, widows, chronically unemployed, etc.... Even as healthy people, sooner or later we benefit for more than we contribute and are thankful for it.

3 years of Kurzarbeit will wipe out any amount LH and its employees have paid in social contributions over the past 20 years.
So their health insurance, social pensions beyond this point will have to be subsidised.

It's a subsidy in any case, the question is whether it's a good/fair subsidy or a bad subsidy.

Let me tell you one more thing.
Before this crisis hit, unemployment was at record lows globally and ceetao ly in Germany where companies couldn't find workers. So if LH Group's 130.000 staff hadn't been employed by LH, they would have had jobs in other companies and industries.
So the 9 billion EUR in subsidies is not really saving jobs, because other companies/industries don't need to be bailed out, it's merely saving the Lufthansa logo.
Hiring a lot of people is one thing, carrying the burden of their social well-being is another thing.
Last edited by Waterbomber2 on Tue Apr 28, 2020 7:55 pm, edited 1 time in total.
 
oldJoe
Posts: 186
Joined: Fri Jan 10, 2020 11:04 pm

Re: Re:

Tue Apr 28, 2020 7:45 pm

Waterbomber2 wrote:
devron wrote:
Waterbomber2 wrote:
Kurzarbeit is already a huge subsidy that LH is receiving.


No it`s an insurance I have been paying (as employee in germany) and LH employees (and LH it self) has been paying. Would be like saying health insurance LH employees get is subsidy. It is just and compulsory insurance like healthcare (like car insurance in Germany btw)

Back on track I really do not like all the individuel airliners in the EU getting a national bailout the EU should decide based on a set of objective criteria which airliners get a bailout. Criteria could be unique routes, crical routes (e.g. business travel more importent then tourism), medical supplytransport, ect..


Yes and no.
Yes, we pay social contributions as a form of insurance, just in case despite our best efforts, we may get sick, injured or lose our jobs.

No, we don't pay social contributions so that big corporations can keep minimal liquidity and pay out all their earnings as bonusses and dividends or reinvest them to gain market dominance (aheum Eurowings) at the expense of competition, knowing that if they run out of money, they can put all their employees on Kurzarbeit/job retention programs/temporary welfare.

If used in the second way, and the government does not punish them for such behavior but rather rewards them with a huge additional bailout package, even the Kurzarbeit becomes a subsidising scheme.

It's not only about what it covers (temporary furlough), but also why (company not managed as good house father) this social measure needs to be enacted.

If LH had saved a good part of their profits or paid off debts using the earnings, (which both also create shareholder value) as a good housefather would do, and despite those efforts still run out of money, then Kurzarbeit would not be a subsidy but what it really is meant to be, ie a social insurance.

Basically, it's a matter of risk and premium, as in any insurance. If social insurance is used for a high-risk trading environment at the same level of coverage and premium as a normal-risk trading environment, it becomes a subsidy.
For instance, many health insurances do not cover ski accidents, bungee jumping, or even general aviation flights. Heck, in many countries they don't even cover a pilot losing his job after losing his license or medical.

Kurzarbeit is not a subsidy for a company that has converted earnings into sufficient liquidity and hence requires no additional state aid during a rainy day, or even a storm like this one.
Example, Daimler AG haven't done great lately, but are not begging for state aid and are prepared to burn through their own cash to weather this crisis:

The most vulnerable of Germany’s major automakers, Mercedes-Benz’s parent company Daimler, has insisted it will not need a Government bailout to survive the Coronavirus/Covid-19 shutdown crisis.

https://www.forbes.com/sites/michaeltay ... d-daimler/


So Daimler burns through their own cash ? Why the secured a 12 bln € loan from banks ? This step is gambling and can end very bad , for example a hostile acquisition from GEELY !
 
Waterbomber2
Topic Author
Posts: 1288
Joined: Mon Feb 04, 2019 3:44 am

Re: Re:

Tue Apr 28, 2020 8:08 pm

oldJoe wrote:
Waterbomber2 wrote:
devron wrote:

No it`s an insurance I have been paying (as employee in germany) and LH employees (and LH it self) has been paying. Would be like saying health insurance LH employees get is subsidy. It is just and compulsory insurance like healthcare (like car insurance in Germany btw)

Back on track I really do not like all the individuel airliners in the EU getting a national bailout the EU should decide based on a set of objective criteria which airliners get a bailout. Criteria could be unique routes, crical routes (e.g. business travel more importent then tourism), medical supplytransport, ect..


Yes and no.
Yes, we pay social contributions as a form of insurance, just in case despite our best efforts, we may get sick, injured or lose our jobs.

No, we don't pay social contributions so that big corporations can keep minimal liquidity and pay out all their earnings as bonusses and dividends or reinvest them to gain market dominance (aheum Eurowings) at the expense of competition, knowing that if they run out of money, they can put all their employees on Kurzarbeit/job retention programs/temporary welfare.

If used in the second way, and the government does not punish them for such behavior but rather rewards them with a huge additional bailout package, even the Kurzarbeit becomes a subsidising scheme.

It's not only about what it covers (temporary furlough), but also why (company not managed as good house father) this social measure needs to be enacted.

If LH had saved a good part of their profits or paid off debts using the earnings, (which both also create shareholder value) as a good housefather would do, and despite those efforts still run out of money, then Kurzarbeit would not be a subsidy but what it really is meant to be, ie a social insurance.

Basically, it's a matter of risk and premium, as in any insurance. If social insurance is used for a high-risk trading environment at the same level of coverage and premium as a normal-risk trading environment, it becomes a subsidy.
For instance, many health insurances do not cover ski accidents, bungee jumping, or even general aviation flights. Heck, in many countries they don't even cover a pilot losing his job after losing his license or medical.

Kurzarbeit is not a subsidy for a company that has converted earnings into sufficient liquidity and hence requires no additional state aid during a rainy day, or even a storm like this one.
Example, Daimler AG haven't done great lately, but are not begging for state aid and are prepared to burn through their own cash to weather this crisis:

The most vulnerable of Germany’s major automakers, Mercedes-Benz’s parent company Daimler, has insisted it will not need a Government bailout to survive the Coronavirus/Covid-19 shutdown crisis.

https://www.forbes.com/sites/michaeltay ... d-daimler/


So Daimler burns through their own cash ? Why the secured a 12 bln € loan from banks ? This step is gambling and can end very bad , for example a hostile acquisition from GEELY !


We're talking about taxpayer money, public funds. I understand how you can get confused when you see governments splashing big public money to save private corporations.

The question of the thread is whether state aid to LH is a bailout or a megasubsidy.
A commercial loan (that Daimler AG has received) is not state aid, hence neither a bailout nor a subsidy.
The exception is if the commercial loan is guaranteed by the government and the government carries all (or big chunk) of the risk, or defaults of commerical loans bankrupt a bank and the government has to step in to cover the savings (again risk covered by government).
 
User avatar
seahawk
Posts: 9630
Joined: Fri May 27, 2005 1:29 am

Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 5:58 am

Bad news on this front. Swiss and Austrian government are willing to hand over large subsidies to OS and Swiss. LH is even considering insolvency to later escape the need to pay the money back. Not one Euro from the taxpayer should be given to them!
 
Waterbomber2
Topic Author
Posts: 1288
Joined: Mon Feb 04, 2019 3:44 am

Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 6:04 am

seahawk wrote:
Bad news on this front. Swiss and Austrian government are willing to hand over large subsidies to OS and Swiss. LH is even considering insolvency to later escape the need to pay the money back. Not one Euro from the taxpayer should be given to them!


Do you have links to news reports?
I would be interested to find out more.
 
 
Blerg
Posts: 4059
Joined: Tue Jan 09, 2018 11:42 am

Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 6:11 am

Waterbomber2 wrote:
seahawk wrote:
Bad news on this front. Swiss and Austrian government are willing to hand over large subsidies to OS and Swiss. LH is even considering insolvency to later escape the need to pay the money back. Not one Euro from the taxpayer should be given to them!


Do you have links to news reports?
I would be interested to find out more.


Austrian Airlines applied on the evening of 27.04.2020 for state aid in the amount of €767 million. It is also reported that Swiss government will guarantee loans for LX totaling €1.4 billion.

https://www.airliners.de/austrian-airli ... lfen/55104
 
Westerwaelder
Posts: 239
Joined: Fri Apr 03, 2020 12:27 pm

Re: Re:

Wed Apr 29, 2020 6:41 am

Waterbomber2 wrote:
oldJoe wrote:
Waterbomber2 wrote:

Yes and no.
Yes, we pay social contributions as a form of insurance, just in case despite our best efforts, we may get sick, injured or lose our jobs.

No, we don't pay social contributions so that big corporations can keep minimal liquidity and pay out all their earnings as bonusses and dividends or reinvest them to gain market dominance (aheum Eurowings) at the expense of competition, knowing that if they run out of money, they can put all their employees on Kurzarbeit/job retention programs/temporary welfare.

If used in the second way, and the government does not punish them for such behavior but rather rewards them with a huge additional bailout package, even the Kurzarbeit becomes a subsidising scheme.

It's not only about what it covers (temporary furlough), but also why (company not managed as good house father) this social measure needs to be enacted.

If LH had saved a good part of their profits or paid off debts using the earnings, (which both also create shareholder value) as a good housefather would do, and despite those efforts still run out of money, then Kurzarbeit would not be a subsidy but what it really is meant to be, ie a social insurance.

Basically, it's a matter of risk and premium, as in any insurance. If social insurance is used for a high-risk trading environment at the same level of coverage and premium as a normal-risk trading environment, it becomes a subsidy.
For instance, many health insurances do not cover ski accidents, bungee jumping, or even general aviation flights. Heck, in many countries they don't even cover a pilot losing his job after losing his license or medical.

Kurzarbeit is not a subsidy for a company that has converted earnings into sufficient liquidity and hence requires no additional state aid during a rainy day, or even a storm like this one.
Example, Daimler AG haven't done great lately, but are not begging for state aid and are prepared to burn through their own cash to weather this crisis:

The most vulnerable of Germany’s major automakers, Mercedes-Benz’s parent company Daimler, has insisted it will not need a Government bailout to survive the Coronavirus/Covid-19 shutdown crisis.

https://www.forbes.com/sites/michaeltay ... d-daimler/


So Daimler burns through their own cash ? Why the secured a 12 bln € loan from banks ? This step is gambling and can end very bad , for example a hostile acquisition from GEELY !


We're talking about taxpayer money, public funds. I understand how you can get confused when you see governments splashing big public money to save private corporations.

The question of the thread is whether state aid to LH is a bailout or a megasubsidy.
A commercial loan (that Daimler AG has received) is not state aid, hence neither a bailout nor a subsidy.
The exception is if the commercial loan is guaranteed by the government and the government carries all (or big chunk) of the risk, or defaults of commerical loans bankrupt a bank and the government has to step in to cover the savings (again risk covered by government).


That is a strange definition of what is a subsidy and what isn't. If a loan is government backed and the government takes on the risk, how is that not a subsidy of sorts?
 
Westerwaelder
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Re: Re:

Wed Apr 29, 2020 6:45 am

Waterbomber2 wrote:
Terrier79 wrote:
Waterbomber2 wrote:

Yes and no.
Yes, we pay social contributions as a form of insurance, just in case despite our best efforts, we may get sick, injured or lose our jobs.

No, we don't pay social contributions so that big corporations can keep minimal liquidity and pay out all their earnings as bonusses and dividends or reinvest them to gain market dominance (aheum Eurowings) at the expense of competition, knowing that if they run out of money, they can put all their employees on Kurzarbeit/job retention programs/temporary welfare.

If used in the second way, and the government does not punish them for such behavior but rather rewards them with a huge additional bailout package, even the Kurzarbeit becomes a subsidising scheme.

It's not only about what it covers (temporary furlough), but also why (company not managed as good house father) this social measure needs to be enacted.

If LH had saved a good part of their profits or paid off debts using the earnings, (which both also create shareholder value) as a good housefather would do, and despite those efforts still run out of money, then Kurzarbeit would not be a subsidy but what it really is meant to be, ie a social insurance.


If you want to educate yourself in German social law, especially "Kurzarbeit", please refer to https://www.gesetze-im-internet.de/sgb_3/__95.html and https://www.gesetze-im-internet.de/sgb_3/__96.html
The regulations when a company is entitled are clearly defined and not only since the Corona crisis. In short: A company is entitled to "Kurzarbeitergeld" if there is lack of work, which is unavoidable, temporary, a result of force majeure and more than a third of the employees are more than 10% short of work. So it is absolutely incorrect and false to state that a company is only entitled to Kurarbeit if it runs out of cash. Please accept that fact and stop creating your own truth.

It has also absolutely zero to do with what companies do with their earning in good times. It is the absolute right of any company to invest, to increase their cash reserves, but also to pay dividends to their shareholders and bonuses to their employees if they had made a good profit.

An open word. It really annoys me reading all this wrong information you spread here out of motives I can only suspect. It's okay to have an opinion, but you continuously and intentionally spread false facts. This is - just as in the other bashing thread regarding SN Brussels you opened today where I decided not to contribute because it's just wasted time - a case for the moderators and I hope they will finally step in.


I can educate you with one question.
Are the social contributions you and your employer pay sufficient to cover your lifetime costs of health insurance, social pension, (temporary) unemployment?

In most cases the answer will be no and remember that the system supports a lot of sick, injured, disabled, widows, chronically unemployed, etc.... Even as healthy people, sooner or later we benefit for more than we contribute and are thankful for it.

3 years of Kurzarbeit will wipe out any amount LH and its employees have paid in social contributions over the past 20 years.
So their health insurance, social pensions beyond this point will have to be subsidised.

It's a subsidy in any case, the question is whether it's a good/fair subsidy or a bad subsidy.

Let me tell you one more thing.
Before this crisis hit, unemployment was at record lows globally and ceetao ly in Germany where companies couldn't find workers. So if LH Group's 130.000 staff hadn't been employed by LH, they would have had jobs in other companies and industries.
So the 9 billion EUR in subsidies is not really saving jobs, because other companies/industries don't need to be bailed out, it's merely saving the Lufthansa logo.
Hiring a lot of people is one thing, carrying the burden of their social well-being is another thing.


Your argument about the 130,000 jobs is flawed at best. Many jobs in Germany are for zero hour contracts where employees have next to none financial security. Unlike the 130,000 employed by LH. There are certain industries that have shortages in skilled roles but the notion that 130,000 airline workers would just slot into these is downright bizarre. Most of the LH roles will be pilots, cabin crew, ground staff, loaders. They will not be able to take up roles in other industries that require a Berufsausbildung and often a formal qualification. Take a break from your insane LH hating tirades please. It becomes tiresome.
 
RvA
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 6:46 am

Not sure a gov backed loan counts as a subsidy. Only if they go bankrupt and the gov has to pay it back, otherwise it’s a loan.
 
Blerg
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 6:48 am

RvA wrote:
Not sure a gov backed loan counts as a subsidy. Only if they go bankrupt and the gov has to pay it back, otherwise it’s a loan.


But what if otherwise they couldn't get it without government guarantees?
 
Westerwaelder
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 6:50 am

RvA wrote:
Not sure a gov backed loan counts as a subsidy. Only if they go bankrupt and the gov has to pay it back, otherwise it’s a loan.


True. It does however mean access to capital that in most cases would not be available otherwise. Or only at an extremely elevated cost. So in a way that is providing a lower cost loan than commercially available - I would see that as a form of subsidy?
 
RvA
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 7:28 am

Westerwaelder wrote:
RvA wrote:
Not sure a gov backed loan counts as a subsidy. Only if they go bankrupt and the gov has to pay it back, otherwise it’s a loan.


True. It does however mean access to capital that in most cases would not be available otherwise. Or only at an extremely elevated cost. So in a way that is providing a lower cost loan than commercially available - I would see that as a form of subsidy?


Unless we know the conditions of the loan we won’t know. A loan that is to be repaid isn’t a subsidy though, it isn’t free money nor is it coming from the government. I doubt we will get to see details but a loan is a loan and unless the government has to step in and pay the bank I don’t see this as a subsidy personally.
 
RvA
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 7:29 am

Blerg wrote:
RvA wrote:
Not sure a gov backed loan counts as a subsidy. Only if they go bankrupt and the gov has to pay it back, otherwise it’s a loan.


But what if otherwise they couldn't get it without government guarantees?


But what if they could? How do we know?
 
RvA
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 7:34 am

seahawk wrote:
Bad news on this front. Swiss and Austrian government are willing to hand over large subsidies to OS and Swiss. LH is even considering insolvency to later escape the need to pay the money back. Not one Euro from the taxpayer should be given to them!


With government backed loans, do you believe the money is coming from the taxpayer and not the bank?
 
SRGVA67
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 7:54 am

RvA wrote:
seahawk wrote:
Bad news on this front. Swiss and Austrian government are willing to hand over large subsidies to OS and Swiss. LH is even considering insolvency to later escape the need to pay the money back. Not one Euro from the taxpayer should be given to them!


With government backed loans, do you believe the money is coming from the taxpayer and not the bank?

The Swiss government is rumoured to guarantee bank loans of up to CHF 1.5 billion with stringent conditions attached. But again, this is a rumour only and the actual state aid for Swiss is expected to be announced some time this afternoon. I don't expect it in any way to be a subsidy or cash loan of government money, unless of course Swiss will go bust later and the banks will turn to the government for repayment.
 
Westerwaelder
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 7:55 am

RvA wrote:
Westerwaelder wrote:
RvA wrote:
Not sure a gov backed loan counts as a subsidy. Only if they go bankrupt and the gov has to pay it back, otherwise it’s a loan.


True. It does however mean access to capital that in most cases would not be available otherwise. Or only at an extremely elevated cost. So in a way that is providing a lower cost loan than commercially available - I would see that as a form of subsidy?


Unless we know the conditions of the loan we won’t know. A loan that is to be repaid isn’t a subsidy though, it isn’t free money nor is it coming from the government. I doubt we will get to see details but a loan is a loan and unless the government has to step in and pay the bank I don’t see this as a subsidy personally.


The fact that anyone needs a government backed loan says they can either not access the credit market or the loans are beneficial. Governments are not banks and do not normally back loans. To be clear, I agree with the government underwriting the risk where its warranted. But to say a government backed loan is not a form of subsidy does not seem right. Why would you need the goverment to underwrite your loan?
 
RvA
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 8:01 am

Westerwaelder wrote:
RvA wrote:
Westerwaelder wrote:

True. It does however mean access to capital that in most cases would not be available otherwise. Or only at an extremely elevated cost. So in a way that is providing a lower cost loan than commercially available - I would see that as a form of subsidy?


Unless we know the conditions of the loan we won’t know. A loan that is to be repaid isn’t a subsidy though, it isn’t free money nor is it coming from the government. I doubt we will get to see details but a loan is a loan and unless the government has to step in and pay the bank I don’t see this as a subsidy personally.


The fact that anyone needs a government backed loan says they can either not access the credit market or the loans are beneficial. Governments are not banks and do not normally back loans. To be clear, I agree with the government underwriting the risk where its warranted. But to say a government backed loan is not a form of subsidy does not seem right. Why would you need the goverment to underwrite your loan?


Without knowing the actual conditions and facts we’re all shooting in the dark. We don’t know what options they have and whatever else is going on behind the scenes at all 3 parties involved in the discussions. Let’s see.
 
Westerwaelder
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 8:17 am

RvA wrote:
Westerwaelder wrote:
RvA wrote:

Unless we know the conditions of the loan we won’t know. A loan that is to be repaid isn’t a subsidy though, it isn’t free money nor is it coming from the government. I doubt we will get to see details but a loan is a loan and unless the government has to step in and pay the bank I don’t see this as a subsidy personally.


The fact that anyone needs a government backed loan says they can either not access the credit market or the loans are beneficial. Governments are not banks and do not normally back loans. To be clear, I agree with the government underwriting the risk where its warranted. But to say a government backed loan is not a form of subsidy does not seem right. Why would you need the goverment to underwrite your loan?


Without knowing the actual conditions and facts we’re all shooting in the dark. We don’t know what options they have and whatever else is going on behind the scenes at all 3 parties involved in the discussions. Let’s see.


Can you think of any example of any industry where a government backed loan was requested that did not fall into one of two categories (loan not available or available at higher cost in the financial market)? That would help me understand your position.
 
RvA
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 8:25 am

Westerwaelder wrote:
RvA wrote:
Westerwaelder wrote:

The fact that anyone needs a government backed loan says they can either not access the credit market or the loans are beneficial. Governments are not banks and do not normally back loans. To be clear, I agree with the government underwriting the risk where its warranted. But to say a government backed loan is not a form of subsidy does not seem right. Why would you need the goverment to underwrite your loan?


Without knowing the actual conditions and facts we’re all shooting in the dark. We don’t know what options they have and whatever else is going on behind the scenes at all 3 parties involved in the discussions. Let’s see.


Can you think of any example of any industry where a government backed loan was requested that did not fall into one of two categories (loan not available or available at higher cost in the financial market)? That would help me understand your position.


I am coming from the position where I simply don’t know the details. Could LHG get a regular loan but the conditions for that would mean shrinking by X percentage, maybe in talks with the government the result is that a govt backed loan is that they are able to retain more staff etc. Who knows. My point is that we simply do not know what is going on behind the scenes but it can’t be forgotten that whatever happens to LHG will directly impact about 4-5x times the amount of people in the next circle of providers and companies that depend on them. I assume LHG fights for itself, the govt is looking at the bigger picture and whatever comes out from that is what we’ll get.
 
Flying-Tiger
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 8:43 am

Westerwaelder wrote:
RvA wrote:
Westerwaelder wrote:

The fact that anyone needs a government backed loan says they can either not access the credit market or the loans are beneficial. Governments are not banks and do not normally back loans. To be clear, I agree with the government underwriting the risk where its warranted. But to say a government backed loan is not a form of subsidy does not seem right. Why would you need the goverment to underwrite your loan?


Without knowing the actual conditions and facts we’re all shooting in the dark. We don’t know what options they have and whatever else is going on behind the scenes at all 3 parties involved in the discussions. Let’s see.


Can you think of any example of any industry where a government backed loan was requested that did not fall into one of two categories (loan not available or available at higher cost in the financial market)? That would help me understand your position.


Or - third category - the credit market is currently simply not able to provide loans (read: BASEL II etc) on the scale requested without securities going over and above what is currently available. Planes, slots, client contracts etc. have lost value on such a scale that it is unlikely that what can be offered by any carrier as collateral towards banks is sufficient to serve as security for the money required. And here the government(s) jump in to provide the security required. IMO that´s what we´ve seen in most cases so far.

To be fair: there´s a multitude of loans backed by governments and/or state-owned banks. EXIM-financing and the european counterparts come to my mind (in Germany: Hermes-Bürgschaften). Nothing unsual per se, only unusal that it´s not applied to export deals but domestically.
Flown: A319/320/321,A332/3,A343/346, A359, A380,AT4,AT7,B712, B732/3/4/5/7/8/9,B742/4,B752/3, B762/763,B772/77W,CR2/7/9/K,ER3/4,E70/75/90/95, F50/70/100,M11,L15,SF3,S20, AR8/1, 142/143,... 330.860 miles and counting.
 
Jetty
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 9:01 am

RvA wrote:
seahawk wrote:
Bad news on this front. Swiss and Austrian government are willing to hand over large subsidies to OS and Swiss. LH is even considering insolvency to later escape the need to pay the money back. Not one Euro from the taxpayer should be given to them!


With government backed loans, do you believe the money is coming from the taxpayer and not the bank?

With a government backed loan the government is willing to risk taxpayers money because whether they have to pay is outside their control. Strictly speaking this should be qualified as government support and not as a government subsidy indeed, but that doesn't seem very relevant to the discussion.
 
FluidFlow
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 9:10 am

Jetty wrote:
RvA wrote:
seahawk wrote:
Bad news on this front. Swiss and Austrian government are willing to hand over large subsidies to OS and Swiss. LH is even considering insolvency to later escape the need to pay the money back. Not one Euro from the taxpayer should be given to them!


With government backed loans, do you believe the money is coming from the taxpayer and not the bank?

With a government backed loan the government is willing to risk taxpayers money because whether they have to pay is outside their control. Strictly speaking this should be qualified as government support and not as a government subsidy indeed, but that doesn't seem very relevant to the discussion.


To be fair the last time Switzerland provided Money to a private entity (UBS), the government made a killing. So they are not stupid and as LX normally makes money for the LH group, the government can expect to make money with this support again.
 
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seahawk
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 9:21 am

That depends on things ever going back to normal and still is hugely unfair compared to other airlines in the common aviation market that do not require state aid like FR for example. FR would surely be interested in a strong presence in Zürich once the market has freed itself from state sponsored competition.
 
FluidFlow
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 9:40 am

seahawk wrote:
That depends on things ever going back to normal and still is hugely unfair compared to other airlines in the common aviation market that do not require state aid like FR for example. FR would surely be interested in a strong presence in Zürich once the market has freed itself from state sponsored competition.


Doubt it, the slots would be there and fees will only know one way, and that is up. If FR want they could fly in and out of Zurich but it is an expensive adventure and it will be hard to undercut fares. Ryanair cannot use Zürich as a base because Labour would be costly.
Zürich has a lot of hurdles for an ULCC that are not caused by LX but by the Airport and Regulations.
 
fraT
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 9:42 am

seahawk wrote:
That depends on things ever going back to normal and still is hugely unfair compared to other airlines in the common aviation market that do not require state aid like FR for example. FR would surely be interested in a strong presence in Zürich once the market has freed itself from state sponsored competition.


Of course they would. But would they also pay their crews adequate salary in the respective countries? I guess everybody knows the answer. If not, ask some Lauda people.
 
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seahawk
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 10:10 am

FR pays according to the home country of the crews, which is legal and efficient.
 
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Faro
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 10:15 am

Waterbomber2 wrote:
I'm a business owner too, where's my quarter's worth of subsidies?
With people across Europe going through harsdhip, small businesses going insolvent right and left, why should the taxpayers be propping up these mega corporations before they are even insolvent?

Why doesn't Lufthansa try to sell equity on the open market first? Their equity is still worth something, and equity markets seem to be upbeat, so why not?




Just like there is no legislation on why and when popular revolution is justifiable, there is no legislation on how to deal with massive, all-pervasive, once-in-a-lifetime economic crises:

What sectors of the economy are legally "vital" apart from food, medicine and education?
When does a de facto market economy regime transition to a state-sustained economy and how does this work?
What happens with all the debt that is created once the crisis is over (just wait one year...)?
Etc.

Who gets what is not defined legally in such a crisis, it is a political decision. Markets matter very little when whole sectors of the economy are looking for emergency 'storage' until the crisis passes. You simply cannot compare the pre- and post-COVID periods economically speaking. They are two fundamentally different animals; one cannot expect to legislate the extreme within so short a space of time...


Faro
The chalice not my son
 
marcelh
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 10:20 am

seahawk wrote:
That depends on things ever going back to normal and still is hugely unfair compared to other airlines in the common aviation market that do not require state aid like FR for example. FR would surely be interested in a strong presence in Zürich once the market has freed itself from state sponsored competition.

Swiss can be considered as “strategic infrastructure” for the country. Compared to that, Ryanair is just a Flixbus/Greyhound with wings. And Ryanair is well-known for only flying to airports as long the local government is willing to pay a subsidy. Also unfair competition for those flying from/to a nearby airport.
 
RvA
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 10:23 am

seahawk wrote:
FR pays according to the home country of the crews, which is legal and efficient.


Yes, for the company. FR pays according to what they can get away with, not what has been the standard. From a business standpoint of course makes sense, but for our industry that means driving wages and conditions down. The UK based (often Eastern European) flight attendant on Ryanair does not get the same conditions as BA or VS cabin crew.

They wouldn’t want to open a base in Switzerland. Even the cleaners there earn more than entry level pilots do in some other of FR’s markets.
 
RvA
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 10:24 am

marcelh wrote:
seahawk wrote:
That depends on things ever going back to normal and still is hugely unfair compared to other airlines in the common aviation market that do not require state aid like FR for example. FR would surely be interested in a strong presence in Zürich once the market has freed itself from state sponsored competition.

Swiss can be considered as “strategic infrastructure” for the country. Compared to that, Ryanair is just a Flixbus/Greyhound with wings. And Ryanair is well-known for only flying to airports as long the local government is willing to pay a subsidy. Also unfair competition for those flying from/to a nearby airport.


Correct. Unless Ryanair also decides to start flying widebodies on longhaul routes which I doubt.
 
mxaxai
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 10:36 am

FluidFlow wrote:
Doubt it, the slots would be there and fees will only know one way, and that is up. If FR want they could fly in and out of Zurich but it is an expensive adventure and it will be hard to undercut fares. Ryanair cannot use Zürich as a base because Labour would be costly.
Zürich has a lot of hurdles for an ULCC that are not caused by LX but by the Airport and Regulations.

With Switzerland not in the EU, could Ryanair even set up a base, hire people etc. there without creating a Swiss subsidiary, AOC etc.? I know that U2 has a Swiss company, and AB used to have one too. Obviously LX is Swiss as well (but owned by LH). They would be subject to Swiss labor laws, so I think U2 will remain the only LCC in Switzerland for some time.

Though, if FR wanted to they could open bases in airports just across the border, like FDH (Germany) or BSL (France).
 
FluidFlow
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 11:07 am

mxaxai wrote:
FluidFlow wrote:
Doubt it, the slots would be there and fees will only know one way, and that is up. If FR want they could fly in and out of Zurich but it is an expensive adventure and it will be hard to undercut fares. Ryanair cannot use Zürich as a base because Labour would be costly.
Zürich has a lot of hurdles for an ULCC that are not caused by LX but by the Airport and Regulations.

With Switzerland not in the EU, could Ryanair even set up a base, hire people etc. there without creating a Swiss subsidiary, AOC etc.? I know that U2 has a Swiss company, and AB used to have one too. Obviously LX is Swiss as well (but owned by LH). They would be subject to Swiss labor laws, so I think U2 will remain the only LCC in Switzerland for some time.

Though, if FR wanted to they could open bases in airports just across the border, like FDH (Germany) or BSL (France).


No they would have to do the same as U2 and open a local subdivision.

So FR could only fly to ZRH from other bases abroad. When you look at U2s network out of ZRH, it is not your normal LCC network, there are mainly high value city connections and the ticket price is in general on par with legacy carriers, or they fly to a non-optimal airport (Gatwick).

There is nearly no market from ZRH to the usual ULCC/LCC destinations that could be served cheap enough compared to flying to the main destinations. If it would be worth it FR would already fly BCN to ZRH, but the fares would be similar to the LX fares most of the times (as a lot of fixed costs are equal, only difference would be labour and a bit of onboard service) and to offer attractive connections (early morning, late evening) the flight would have to leave BCN really early or in the afternoon as there would be no return flight possible in the evening (curfew) or the morning flight would be too late from ZRH to catch people that want to use the extra day in Barcelona. On top of this, there are limited remote gates (cheap) and it is not that easy to have a quick turn around in ZRH during the main connection banks. All this adds up costs in fees. ZRH is a really expensive airport and will only get more expensive with all the green policies.
Now if you are known as a rather expensive airline (LX) then an increase of CHF 25 to CHF 175 due to fees is taken easier by the customers compared to the FR customers having to pay 150 instead of 125.
 
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Executor
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 11:44 am

Westerwaelder wrote:
RvA wrote:
Westerwaelder wrote:

True. It does however mean access to capital that in most cases would not be available otherwise. Or only at an extremely elevated cost. So in a way that is providing a lower cost loan than commercially available - I would see that as a form of subsidy?


Unless we know the conditions of the loan we won’t know. A loan that is to be repaid isn’t a subsidy though, it isn’t free money nor is it coming from the government. I doubt we will get to see details but a loan is a loan and unless the government has to step in and pay the bank I don’t see this as a subsidy personally.


The fact that anyone needs a government backed loan says they can either not access the credit market or the loans are beneficial. Governments are not banks and do not normally back loans. To be clear, I agree with the government underwriting the risk where its warranted. But to say a government backed loan is not a form of subsidy does not seem right. Why would you need the goverment to underwrite your loan?


A government guarantee is, by definition, a subsidy. Regardless of the situation, needs or conditions of the loan.

By offering a guarantee, a government is providing an insurance against the non-repayment (of interests or principal). This kind of insurance is widely available on the market (ie CDS, Credit Default Swap) but can be costly. As the government is providing it for free instead of charging a premium, it is a subsidy (of the amount of the premium) regardless whether a default happens or not.

This subsidy is split between the lender and the borrower, although we can expect the borrower to get most of it in the current situation.

I'm not saying it should or should not be done. Those are extraordinary circumstances. But it is indeed a subsidy.
 
RvA
Posts: 380
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 11:47 am

Executor wrote:
Westerwaelder wrote:
RvA wrote:

Unless we know the conditions of the loan we won’t know. A loan that is to be repaid isn’t a subsidy though, it isn’t free money nor is it coming from the government. I doubt we will get to see details but a loan is a loan and unless the government has to step in and pay the bank I don’t see this as a subsidy personally.


The fact that anyone needs a government backed loan says they can either not access the credit market or the loans are beneficial. Governments are not banks and do not normally back loans. To be clear, I agree with the government underwriting the risk where its warranted. But to say a government backed loan is not a form of subsidy does not seem right. Why would you need the goverment to underwrite your loan?


A government guarantee is, by definition, a subsidy. Regardless of the situation, needs or conditions of the loan.

By offering a guarantee, a government is providing an insurance against the non-repayment (of interests or principal). This kind of insurance is widely available on the market (ie CDS, Credit Default Swap) but can be costly. As the government is providing it for free instead of charging a premium, it is a subsidy (of the amount of the premium) regardless whether a default happens or not.

This subsidy is split between the lender and the borrower, although we can expect the borrower to get most of it in the current situation.

I'm not saying it should or should not be done. Those are extraordinary circumstances. But it is indeed a subsidy.


Do you know this is for free? I can’t find any details around the conditions of this at all.
 
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Executor
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Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 12:05 pm

RvA wrote:
Executor wrote:
Westerwaelder wrote:

The fact that anyone needs a government backed loan says they can either not access the credit market or the loans are beneficial. Governments are not banks and do not normally back loans. To be clear, I agree with the government underwriting the risk where its warranted. But to say a government backed loan is not a form of subsidy does not seem right. Why would you need the goverment to underwrite your loan?


A government guarantee is, by definition, a subsidy. Regardless of the situation, needs or conditions of the loan.

By offering a guarantee, a government is providing an insurance against the non-repayment (of interests or principal). This kind of insurance is widely available on the market (ie CDS, Credit Default Swap) but can be costly. As the government is providing it for free instead of charging a premium, it is a subsidy (of the amount of the premium) regardless whether a default happens or not.

This subsidy is split between the lender and the borrower, although we can expect the borrower to get most of it in the current situation.

I'm not saying it should or should not be done. Those are extraordinary circumstances. But it is indeed a subsidy.


Do you know this is for free? I can’t find any details around the conditions of this at all.


That's a fair question, considering the conditions of the loan are not yet public (and, indeed, not even agreed upon). However the only reason why the government would intervene to offer that is that it can provide it for free (or, at the very least, charge a lower price than the real cost of such insurance). The government is not a bank. If you need the government to intervene instead of going to your bank, it means you're getting something out of it.

Usually, in those circumstances, the guarantee is provided for free. It is the case with the current Swiss scheme for SMEs, for example. (A scheme not valid for LX).
 
RvA
Posts: 380
Joined: Tue Sep 15, 2015 12:37 pm

Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 1:14 pm

LX and WK support is now confirmed.

Liquidity aid for Swiss and Edelweiss: The federal government guarantees a maximum loan of CHF 1,275 billion.

No link as heard it, not yet seen it online.
 
Blerg
Posts: 4059
Joined: Tue Jan 09, 2018 11:42 am

Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 1:21 pm

RvA wrote:
LX and WK support is now confirmed.

Liquidity aid for Swiss and Edelweiss: The federal government guarantees a maximum loan of CHF 1,275 billion.

No link as heard it, not yet seen it online.


Has the government placed any restrictions on the guarantees like the Austrian and German ones have?
 
Blerg
Posts: 4059
Joined: Tue Jan 09, 2018 11:42 am

Re: Lufthansa 10+ Billion EUR package: bailout or megasubsidy?

Wed Apr 29, 2020 1:27 pm

Austria's Chancellor Sebastian Kurz made a statement ahead of his meeting with LH CEO that they fear a scaled down Lufthansa Group could impact Vienna airport's status of a transfer hub. Seems like the Austrians will insist on Austrian Airlines remaining an important European carrier.

Let's see what happens in the coming hours, days and weeks. Interesting times ahead, that's for sure.

https://www.airliners.de/haben-interess ... wien/55128

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