Struggling Luxair finances face scrutiny
Rescue talks for struggling national passenger airline Luxair are needed in part because one of its key cash sources -- dividends from state-owned freight airline Cargolux – are unlikely to be as hefty as the past two years, top government officials said on Thursday.
State-owned Luxair's financial condition was “not good,” Transport Minister François Bausch told members of a parliamentary commission, according to a description of the meeting on the Chambre des Députés website.
Luxembourg has been able to forego subsidising the passenger carrier despite the pandemic crippling its operations in 2020 and 2021 thanks to nearly €100 million in dividends from Cargolux, which in contrast enjoyed two years of record profits and is 35% owned by Luxair.
"The forecasts are no longer at the same level,” Bausch told parliament's Mobility and Public Works Commission, according to the website.
Luxair, its unions and government officials are scheduled to meet beginning 26 September in an effort to resolve the company's problems.
Cargolux did not respond to Luxembourg Times when asked about its profit projections for this year. Luxair would not describe its financial estimates, but airline spokespersons noted the company's condition is shared with its board of directors, which includes one of Bausch's top aides.
Luxembourg government officials see Luxair as key to accommodating the business travel required by its core financial industry. Sixty percent of the airline is owned by the Luxembourg state and state-owned bank Spuerkeess.
The impact of Russia's invasion of Ukraine, soaring fuel price increases and a looming economic downturn hangs over Luxair even though passengers unleashed after two years of Covid-19 lockdown this summer strained the Luxembourg airline. Luxair Chief Executive Officer Gilles Feith made clear as early as May that the airline faced more headwinds.
Feith also made clear that the state-owned airline relied on Cargolux dividends to compensate for losses that last year amounted to €2.3 million. Luxair logged a €155 million operating loss in 2020.
The airline negotiated a deal in late 2020 allowing the company to cut hundreds of jobs through a mix of early retirements, retaining and transfers to government positions. Some airline workers continue to be employed part-time, something that Bausch said this week must end.
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