German aviation is shrinking. More than 20,000 jobs at Lufthansa are threatened by the corona crisis. At Tuifly, up to 900 jobs could be lost. And at Condor?
«We are currently in talks with the social partners and cannot rule out job cuts,» said Ralf Teckentrup, head of the leisure carrier in an interview with aeroTELEGRAPH. He does not want to say how many jobs are threatened. However, he announces: «From the summer on, we will not be able to increase short-time work benefits.» In an interview with the Frankfurter Allgemeine Sonntagszeitung, Condor spoke of a reduction of 15 to 25 percent of employment or 650 to 1000 positions.
Advantage through protective shield
From Teckentrup's point of view, Condor currently has an advantage over other airlines. «Our protective shield proceedings meant that we had to start restructuring as early as last September», says the airline's CEO in the interview. As a result, Condor had already reduced costs before the Corona crisis.
The German leisure airline had rescued itself in autumn 2019 with a protective shielding process. In this way, he protected himself from claims by his insolvent parent company Thomas Cook. It also enabled Condor to gain independence.
Teckentrup points out, for example, that Condor already initiated the reduction of 170 jobs in December. Due to the corona crisis, the wet lease contracts with Thomas Cook Aviation and Thomas Cook Balearics have been terminated, which was possible at short notice due to the protective shielding procedure.
Condor also has a further, unexpected advantage. This is fuel hedging, meaning hedges with which airlines purchase fuel at a price fixed in advance. Due to the rapid drop in oil and fuel prices, this procedure is costing many airlines a lot of money at the moment. Lufthansa alone expects a financial burden of around one billion euros for the current year 2020.
Fuel only cheap for Condor
«Due to the protective shielding process, we were only able to hedge our fuel purchases until the end of March,» says Teckentrup. «As a result, we are currently buying kerosene at the current market price.» This saves the holiday airline a lot of money. Should prices rise again, this could also have an adverse effect at some point.
But for now, Condor is benefiting from low fuel costs, for example with the 14 of its 16 long-haul planes that have been converted to freighters. «Their capacity utilization is quite good at the moment, even if business is not as strong as it was four or six weeks ago,» says the CEO. «But of course we'd rather fly passengers and will convert the jets as soon as we can fly to long-haul destinations again.» If the aging long-haul fleet is renewed in the future, the airline could then benefit from lower aircraft prices and leasing rates.
Like a convertible in November
It is difficult to predict when which destinations will lift the travel restrictions. However, Condor suspects that the share of package tours compared to individual trips will increase after the Corona pandemic. This would benefit the holiday airline, which occupies most of its seats through tour operators.
Condor plans to leave the protective shield by the end of September. For the time being, the management is not looking for a new investor after the failed sale to the Polish PGL. «Condor is not for sale at the moment,» Teckentrup clarifies. This will only change once the Corona crisis is over. «Putting Condor up for sale now would be like trying to sell a convertible in November,» he said.
Credit runs for more than ten years
Last autumn, Condor had received a state-guaranteed transitional loan of up to 380 million euros. In the wake of the Corona crisis, the holiday airline received another state-guaranteed loan of up to 550 million euros in April. Condor used 256 million of this to repay the portion of the 380 million that it had actually used. The remaining 294 million are to help the airline get through the corona crisis.
The 550 million loan, which will be paid out gradually, has a very long term. «We have agreed on more than ten years for repayment,» explains Teckentrup. The Condor head did not reveal which interest rate is due.
