Billions for Swiss and Co. – or: The trip to Rome and the fooled taxpayer

Governments support airlines with aid packages worth billions. Does that make sense in view of the dumping prices with which the industry advertises? Time for a critical assessment.

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The trip to Rome and the fooled taxpayer The trip to Rome is actually a fun board game. But the international airline industry is taking it bitterly seriously. Dance in a circle and quickly occupy the next chair when the game master claps his hands – almost all airlines in the world are still in this group.

Ironically, their funding is reasonably secure as long as the pandemic keeps the planes on the ground. But what happens when business starts up again and the companies have to earn their money again in the market? Then the scramble for vacant chairs starts immediately. And one thing is already clear: if you are kicked out, you leave your country and its taxpayers a big bill.

As of the end of September, airlines around the world had received $ 160 billion in government corona bridging aid, as the world umbrella organization IATA has just discovered. Another 80 billion dollars are needed to prevent a bloodbath.

Big risk for taxpayers

The governments make a large part of these billions of taxes available to the airlines almost free of charge. This also applies to the billions in loans to the Lufthansa subsidiaries Swiss and Edelweiss, for which the federal government is largely responsible. Interest rates between zero and one percent naturally do not include a risk premium. The risk of these loans for us taxpayers is extremely high.

And it doesn’t seem to get any smaller when travel becomes possible again. Ryanair boss Michael O’Leary recently predicted with a view to the coming year: “We will see a rapid recovery in demand, but pricing will be at a very low level.”

We consumers should think twice about the secret anticipation of even cheaper airfares. After all, we are all taxpayers too. From that perspective, a price war in the sky is a terrible prospect. With cheap fares à la Ryanair, Swiss, Edelweiss and all other airlines will never be able to repay the many free billions.

Who will benefit from the decoy offers?

One might object that Ryanair, the low-cost airline par excellence, has not yet received any free money from the government and has still remained without a loss at least until the end of June. But not even Ryanair itself is so bold to claim that it will bring every passenger to Stockholm or Rome for £ 9.99, as the advertising suggests. In fact, only a few passengers per flight benefit from the decoy offer. An average seat costs five or even ten times as much.

So what’s the point of hysteria when the price war is just a mirage anyway? The problem is that those airlines are coming under pressure that cannot communicate their tariffs so sensationally – these are above all those airlines where the state has a say. Their tariffs appear much more expensive than those of the cheap providers. The fraudulent advertising forces them to keep their prices at an unhealthy low level or even to lower them. We taxpayers bear the risk and the costs of this.

Lawsuits are a rarity

The finding is definitely not new, but more important than ever: there is sick competition in the airline industry. Theoretically, competition law prohibits services being offered at prices that are below the variable production costs. In the case of Ryanair’s £ 9.99, this is clearly the case, of course.

However, lawsuits under competition law due to unfair dumping prices are very rare – not only because the allegation of dumping is difficult to prove. One of the main reasons people in the airline industry never complain is that each government thinks it is ultimately more nimble or smarter than the other. This self-deception works until there is no more vacant chair. Only one person can win on the trip to Rome.