Following the news that the Austrian Chancellor met the CEO of Lufthansa Group to discuss the future of Austrian Airlines;

John Vandesquille, Travel & Tourism Analyst at GlobalData, a leading data and analytics company, offers his view:

“Lufthansa’s request to the Austrian conservative-green government for more than US$835m of public aid for its subsidiary Austrian Airlines is likely to be subject to a number of strict environmental and governance conditions.

“These conditions echo those laid down recently by the German Government in exchange for a US$9.76bn rescue package for Lufthansa. Under the proposed terms, financing will be subject to a 9% interest rate, and the German state would take a 25% stake in the group, as well as gain significant voting rights.

“Such a state influence on the business is deemed absolutely unacceptable by the airline’s CEO, Carsten Spohr, who threatened to initiate self-administered bankruptcy proceedings (something possible under German law) should the government continue to insist on such conditions.

“As the group’s US$4.77bn cash reserve pile is rapidly running out, to the point that it might not actually be able to sustain the aforementioned bankruptcy, it is hard not to see this as a bluff aimed at applying pressure on the German Government to ease its demands.

“This is not the only leverage the group has. Indeed, as it is also about to enter into negotiations with the Swiss and Belgian governments, Lufthansa could easily play on their fears of losing their flag carriers (Swiss and Brussels Airlines, owned by the group) to get the help it wants without the condition of an increased state intervention in governance.”