Austrian Airlines Struggle Bottom Line

Austrian Airlines struggles have become a major issue in Austria. The airline finds itself in a very difficult situation. The airline has been hit hard by the COVID19 pandemic. However, its parent company (Lufthansa) is also in a difficult financial situation and needed a government bailout. Without Lufthansa to inject any cash, the airline resorted to their national government for aid. The Austrian government has so far been reluctant to invest enough cash to keep the airline afloat. 

What Austrian Airlines was Prior to COVID19

Prior to the pandemic, Austrian Airlines was the second smallest national carrier part of the Lufthansa group (bigger than Brussels Airlines and smaller than SWISS). The airline had long been in partnership with Lufthansa and was (is?) an integral part of the Lufthansa Group strategy. They flew a mix of aircraft, from old Fokkers to newer E190s, from A321s to 777s . Their varied fleet made them a unique airline of its size in Europe, one without a uniform fleet. The airline was not in any serious financial distress prior to the crisis; however, with flights suspended, the airline has been unable to get a fresh injection of cash. 

Austrian Airlines Struggles Currently

The current crisis between the Austrian Government and the airline has made Austrian Airlines need to seek other sources of cash. The Lufthansa Group, their parent company, has also been unable to financially survive on its own. The German government has offered them a bailout, but that money cannot be used to finance any airline group outside of Germany (and I am unsure if they will be able to use the money for Eurowings even). Austrian is therefore stuck without any easy answer.

The airline has two viable alternatives: either reduce itself to a shell of what it is today to cut costs or find an outside investor. It has been noted that Etihad and IAG are interested in acquiring an interest in the company. IAG is the parent of British Airways, Iberia, Level, Vueling, and Aer Lingus. Etihad has had a series of unsuccessful investments in airlines over the last few years. 

Benefits of IAG

If IAG decides to purchase a stake in Austrian, the group could merge its current LEVEL base in Vienna with that of Austrian. This would make for easier expansion of the LEVEL brand in Austria, and give the airline more wiggle room to expand in other countries. However, the Austrian-IAG tie-up would probably run into issues with EU regulators, who might be fearful of IAG growing too large or issues with competition. Although this can be resolved, it would be rather difficult without sacrificing some of the synergies the airline would be seeking via the acquisition.

Benefits of Etihad

The primary benefit of the Etihad purchase would be the ability to skip EU regulations. The airline no longer has a presence in Europe, with all their prior investments effectively defunct (except for Air Serbia which is a small carrier). If Etihad were to purchase Austrian, it would feed mostly into Abu Dhabi and possibly still remain related to the Lufthansa Group. Etihad has a partnership with Lufthansa, which would save some re-partnering costs. I do suspect, however, that with Etihad’s track record and their financial position post-COVID this investment would be too risky to actually pan out. 

Landing Thoughts

Although it is not the best outcome for Austrian, an IAG tie-up seems the most likely. I would prefer if Austrian stayed in the LH Group, the airline has had a long relationship with them and is well connected through Lufthansa and Star Alliance. If the Austrian government decides to allow IAG to step in, expect a major disruption in the aviation scene in Central to Eastern Europe. Will this happen? Possibly, but I am not too bullish about it. Will other airlines consolidate and join larger conglomerates, almost certainly. 

What do you think? What will end up happening with Austrian Airlines? Do you think that they should partner with someone else or should they remain a part of the Lufthansa Group? Let us know!

Here is a list of all my flight reviews: The Millennial Traveler Flight Reviews

Here is a list of all my lounge reviews: The Millennial Traveler Lounge Reviews

If you want to stay up to date with the latest airline news follow me on Twitter, Facebook or LinkedIn!

Also follow Travel Update and Boarding Area on Twitter!