European airlines have accessed more than $45 billion in bailouts from their governments. While aid has not been made available for every airline, some individual brands and groups have received multi-billion-dollar bailouts, most in the form of repayable loans. Speaking to Simple Flying, easyJet CEO Johan Lungren cast doubt on whether they will ever be repaid at all.
Europe’s bailouts aren’t there for everyone
Across Europe, in particular, airlines have received substantial bailouts to weather the storm of COVID. For the most part, these have not been free handouts of money; rather, they are loans that will eventually need to be repaid. Having so much debt hanging over their businesses is unwelcome, but it was the only way for many of these airlines to survive the crisis.
In the past, easyJet’s CEO Johan Lundgren has blasted these huge bailouts for distorting the market. However, speaking to Simple Flying last week, Lundgren said that he was not against the bailouts specifically, stating that,
“I have not been against state aid as such. I believe that this has gone over and above what you can expect the industry to deal with and, because our industry and sector is a vital part of infrastructure for many, many countries, it has to be around. It has to be supported.”
Lundgren’s bugbear is directed more at the lack of joined-up thinking between European governments. The level of aid dished out has varied greatly between countries; it is that characteristic that is un-leveling the playing field. He said,
“The fact that these funds aren’t accessible and there for everyone that is the concerning part of this.”
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Will they ever be repaid?
According to data from Transport & Environment, European airlines have sought some €41.9 billion ($49.8 billion) in support from their governments. While some are still under discussion, $37.8 billion ($45 billion) in funding has now been agreed.
Some of the biggest bailouts in Europe include €6.8 billion ($8 billion) for the Lufthansa Group, €8 billion ($9.5 billion) for Air France-KLM Group and €3.5 billion ($4.1 billion) for the TUI Group in Germany. Lungren raised some doubt over whether these airlines would ever be in a position to pay these loans back, commenting,
“This is the thing; how will this play out in the long-term future? Because there’s no historical evidence that the financial performance of these airlines … can ever repay this!”
For easyJet, that could mean things go one of two ways, as the CEO described,
“Either that makes for a very healthy competitive marketplace for people such as ourselves to be able compete because the interest rates to serve these debts are going to be huge, and that will have an impact on the pricing environment where we operating, or will it be the case that one sunny day, when we look the other way, some of these debts will be written off because the governments are also owners of these airlines. Who knows? But we will keep a very close eye on it.”
As yet, only Lufthansa has been partially taken over by its government. However, that’s not to say that other governments won’t look to alleviate the financial pressure of COVID loans on their airlines in the future. It remains to be seen which way the dominos fall.
Do you think airlines will pay back their state aid?
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