Liquidity gap

Germania finds investor to keep it flying

German leisure airline Germania has found an investor at short notice to fill a liquidity gap and keep it flying to destinations in Southern Europe and beyond.

January 10, 2019
Karsten Balke is CEO and owner of Germania.
Photo: Germania

In a dramatic week, the Berlin-based niche carrier, which flies more than four million passengers a year to 60 destinations in Europe, North Africa and the Middle East, announced on Tuesday that it was “currently examining various financing options to ensure its short-term liquidity needs” but stressed that all flights were continuing to operate normally.

Germania had a financial shortfall of about €20 million at the end of December 2018 to finance its winter flights, according to aviation portal Aero Telegraph, which reported that the airline had already held talks with various potential investors last month. Airlines registered in Germany have to prove to the German civil aviation authority that they have sufficient financing for their flight operations.

Germania blamed its financial difficulties on a challenging year in 2018. “Unforeseeable events such as the massive increases in fuel prices last summer and the simultaneous weakening of the euro against the US dollar were major burdens for our company, as were considerable delays in phasing aircraft into our fleet and an unusually high number of maintenance events that our aircraft required.”

The airline, owned by CEO Karsten Balke, continued: “We are focusing on the central question of how we can continue to be effective in a market environment dominated by airlines under larger corporate structures.”

Then, on Wednesday evening, Balke told the 1,000 staff that talks with unnamed investors had progressed positively and payments had been made to ensure the airline could prove its financial liquidity to the German civil aviation authority. He said he was confident that further financing would quickly follow.

“The serious interest of the investors makes us optimistic that we can continue to exist as an independent airline in a market mostly characterised by large groups,” he commented.

News of Germania’s financial problems surprised and shocked German tour operators, who contract about 60% of the airline’s total capacity, in particular on flights from smaller regional airports to holiday destinations. TUI is the largest single client, accounting for about 15% of Germania’s seat capacity. However, tour operators have contracted relatively few seats on Germania flights during the winter season.

Nevertheless, the German tourism industry has a strategic interest in retaining the airline as a niche supplier, especially on routes that do not generate sufficient passenger volumes for larger planes, such as those operated by TUIfly or Condor. Schauinsland chief Gerald Kassner described Germania as “a good, reliable” partner while DER Touristik flight procurement manager Jürgen Bongartz underlined: “Germania is important for smaller airports.”

Germania, with a current fleet of 37 planes, has not published results for 2017 yet. In 2016, according to official accounts, the airline made a loss of €7.7 million on turnover of €369 million.

The airline has embarked on a major fleet modernisation programme with an order for 25 brand-new Airbus A320neos, with deliveries due from 2020 through to 2022. These would replace older Airbus jets and leased Boeing planes.

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