BERLIN - Less state involvement, more privatisation: That prevailing guideline in many European countries in the 1990s led to German carrier Lufthansa being sold to the private sector but now the renowned airline finds itself in dire straits.
Lufthansa has lost 95 per cent of its passengers amid the coronavirus pandemic and is looking for help - from the German government.
Negotiations centre on loans in the range of double-digit billion euros. Although Lufthansa itself is trying to avoid a direct state ownership, German finance minister Olaf Scholz has no qualms about it: "If this makes sense and helps we are ready to do it.".
Lufthansa now operates only 15 long-haul flights a week to North America, Asia and Africa.
"Today our schedule looks like the one of 1955," chief executive Carsten Spohr said recently, adding: "This shows how dramatic the situation is".
Other airlines of the Lufthansa Group are even worse off. Germanwings, a 100 per cent affiliate that serves European destinations, was liquidated earlier this month.
Swiss serves only selected European cities from Zurich and Geneva and continues to run three weekly long-haul flights to Newark in the United States. Austrian Airlines operations have been suspended until at least May 17.
Lufthansa is experiencing the fate of many other carriers. Airlines such as Air France-KLM, which is already partially owned by the French and Dutch states, might even get increased government involvement.
Virgin Australia needs state help in the order of at least A$1.4 billion (S$1.27 billion) otherwise Qantas will become the only Australian airline and thus a monopolist.
This is why the Australian government considers Virgin as systemically relevant - very much to the dismay of Qantas CEO Alan Joyce.
Mr Joyce propagates the "survival of the fittest". In March he said: "We can ride this out. Not all airlines around the world will."
He added that the government should not nationalise Virgin and "not look after the badly managed companies which have been badly managed for 10 years".
It is true that Qantas's balance sheet looks much better than those of many of its competitors. So far, at least, it has not asked the state for financial support and rather is borrowing money on the capital market.
New Zealand already has decided to help its carrier Air New Zealand with NZ$900 million. The NZ government owns 52 per cent of the airline and might even increase its share.
"Without this intervention, New Zealand was at risk of not having a national airline," Finance Minister Grant Robertson said.
The US situation is similar. Congress approved US$32 billion in grants for US airlines and suppliers in late March to safeguard the payment of employees until the end of September.
In exchange for the grants, the US government may receive warrants, stock options or other securities. Eventually this could come down to state ownership.
The US government did this after the 9/11 terrorist attacks when it took a warrant for about 18 million shares in America West Airlines in exchange for a loan of US$429 million. The stake was later sold with a return of 30 per cent.
United Airlines CEO Oscar Munoz and President Scott Kirby told employees last week that the carrier is cutting about 90 per cent of its May capacity.
"Travel demand is essentially zero and shows no sign of improving in the near-term", the executives wrote. " Less than 200,000 people flew with us during the first two weeks of April this year, compared to more than six million during the same time in 2019, a 97 per cent drop.
"And we expect to fly fewer people during the entire month of May than we did on a single day in May 2019."
The company has set up programmes for leave of absence and voluntary redundancies. More than 20,000 United employees have already voluntarily opted for unpaid leave.
In Germany the government has paved the way for more state ownership by introducing a 100-billion euro equity fund that can be used to lend money or acquire stakes in private companies.
If an enterprise employs at least 250 co-workers and has "special significance" for the economy, technological sovereignty, critical infrastructure or the labour market the government can step in. The law is designed to prevent foreign investors taking advantage of the crisis and buying shares at discount rates.
Observers are reminded of the 2009 financial crisis when the German government saved Commerzbank from bankruptcy by buying 25 per cent of the shares.
Commerzbank, the fourth biggest German bank, is the go-to financier, especially for small and medium-sized companies, which are the backbone of the German economy.
The plan was that the state would be only temporarily involved and would sell its shares after consolidation.
But 11 years later and with a 15 per cent holding, the government remains a significantly investor.
"Once you get in you also have to know how to get out", former state secretary of finance, Jörg Asmussen, commented on the perils of state involvement in an interview.