The fallout from the failure of Thomas Cook is continuing to affect associated travel agents across Europe, whilst German airline Condor also faces uncertainty.
The German Government have confirmed that Condor, which was 49% owned by Thomas Cook Group, requires an urgent cash injection of 380 Billion Euros in order to keep operating.
Officially “Condor Flugdienst GmbH”, the company confirmed in the early hours of this morning that it had received guarantees from the German Government of a bridging loan for a period of six months in order to provide the emergency liquidity it needs.
The European Union however, tightly controls member states involvement in private sector bail-outs, something which Condor acknowledged in a statement. It said; “Only after the European Commission has taken a positive decision can the loan by German Development Loan Corporation KfW be disbursed. The date for the decision is still to be confirmed.”
The company went on to say; “The State guarantee for a bridging loan was applied for in order to prevent possible liquidity bottlenecks at Condor, resulting from the insolvency of its former British parent company, Thomas Cook Group plc.”
Condor has been operating as a stable part of the wider business right up until its failure last weekend. The issue for Condor now is the lack of accessible funds, and the restriction of liquidity and access to credit lines.
As a result of this, Condor has filed an application for “a protective shielding procedure” which would protect it from possible claims against Thomas Cook Group plc and to separate itself from the Group. This move is known more commonly in the UK as a “pre-packaged administration”.
In literal terms, Condor will enter the German equivalent of administration whilst it awaits the approval of the bridging loan.
Ralf Teckentrup, CEO of Condor Flugdienst said; “As a profitable company with a positive cash flow and good business development, we are using the shielding procedure to protect ourselves from possible claims of our former British parent company, Thomas Cook Group plc.
“In the current situation, this step is the best for our customers, our business partners, suppliers and for us. It gives us full independence from Thomas Cook Group plc and more security for our future. It is a formally necessary and logical step for us. Our business operations continue as planned and we will continue to ensure that our guests reach their destination safely and reliably.”
“Our fleet is operating and ticket sales for Condor flights continue as normal.”
The worrying thing for the decision makers in the European Commission, even with Condor acknowledging that any bridging loan is subject to their approval and that it is time limited to six months, is whether the airline would be capable of repaying that loan in the time period.
In the financial year 2018/19, Condor Flugdienst GmbH generated an operating profit of 43 million Euros on a turnover of around 1.8 billion Euros.
Suddenly having to find 380 million Euros plus interest within six months of the loan being approved, and worst of all, across a winter operating period, when tourist and charter traffic is at its lowest, will be a major hurdle.
One potential option for Condor would be to secure the short-term lending by assuring the European Commission that the airline is up for sale – potentially to German flag-carrier Lufthansa.
Lufthansa have signalled a possible interest in Condor, although an official position is yet to materialise.
The other issue for Condor where the European Commission is concerned, is that for a state bailout of a private company to be approved, it must be deemed an economic necessity in respect of the member state. For example, would the German economy be sufficiently damaged by the failure of the company?
Despite the short-term economic impact on the 4,900 Condor employees, partners, suppliers – it will be an impossible sell to say that the German economy as a whole would suffer sufficient damage by its collapse.
Condor is by no means the only travel option available to the people of Germany to travel by air, to holiday destinations around the world. Whilst there would inevitably be an immediate impact on those directly involved, it would not be intrinsically damaging to the German tourism industry.