Condor: What the Polish LOT plans to do with the German holiday plane

Shortly after eleven on Friday morning: the million dollar deal is announced at two locations at the same time, an hour’s flight apart. While in Frankfurt am Main the managers of Condor and LOT announce the takeover of the German holiday plane by the state-owned Polish airline, Warsaw’s Prime Minister Mateusz Morawiecki and Minister for State Participation Jacek Sasin shine in the cameras. Behind the politicians is a logo wall with the trademarks of LOT and Condor. They apparently had their PR departments built especially for this date.

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The head of government triumphs. This is an extraordinary moment, explains Morawiecki. The expansion of LOT shows “that our country’s rise to the group of fully developed countries is no accident. Polish companies take over powerful foreign companies”.

That the “mighty” Condor with its around 5000 employees was on the verge of bankruptcy and only survived thanks to a bridging loan from the Federal Government and the State of Hesse.

That has never happened before

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A Polish state-owned company swallows a German airline: it has never happened before. With a reported purchase price of more than 600 million euros, the takeover is probably the most spectacular that a Polish company has ever made in the neighboring country. And the right-wing PiS government is celebrating itself for the deal.

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16 tweets fire Morawiecki’s State Chancellery and Sasin’s Ministry within less than an hour and a half. One says: “The Polish economy and its companies no longer have complexes.” Make Poland Great Again.

LOT was once a complex case itself. In 2013 the airline was on the verge of bankruptcy. Every year she flew losses, ten CEOs wore them out within 13 years. A sale was repeatedly discussed – among other things to Lufthansa. In the end, Poland’s taxpayers had to save the company; the LOT has been completely nationalized.

After a successful restructuring, the LOT has been growing strongly again for several years – and is making profits. Years ago, the government wrote the turnaround itself on the flags. LOT only survived thanks to the PiS, said the then finance minister. His name: Mateusz Morawiecki.

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“Another Element of Building State Capitalism”

When LOT chief Rafal Milczarski celebrates the Condor takeover this Friday, he exuberantly thanks the head of government. “Mateusz Morawiecki made it possible,” he says. And: “The Polish state is financing this transaction.” Specifically, a consortium of the Pekao, PKO and PZU money houses is providing the millions. All three are closely related to the Ministry of Finance. The magazine “Polityka” calls the Condor takeover “another element in the building of state capitalism” under the PiS.

The deal can be sold politically in Warsaw. But does it also make economic sense to merge a Polish scheduled airline with a German leisure airline?

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“I don’t think Condor can make the money the Poles are now paying,” said aeronautical expert Gerald Wissel, head of Airborne Consulting. “There are no major synergies between the two airlines – unless the entire business is bundled in Poland, where staff costs are lower.”

There is no talk of this kind of job cuts at Condor, which such a plan would bring, in Germany this Friday. On the contrary, the LOT boss explains: “I need everyone.”

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Milczarski, on the other hand, is vague on the subject of synergies. According to him, Condor should become a kind of competence center for tourism at LOT in the future. In addition to the existing business concentrated in Germany, Warsaw and especially the Hungarian city of Budapest could become new starting points for Condor machines. It is also very likely that Condor will become a provider on the Polish charter market.

Lufthansa could become a problem for LOT / Condor. The German market leader should see the takeover as an attack on its Frankfurt hub. That could have consequences. Condor is dependent on feeder flights from Lufthansa. If passengers want to fly the holiday plane from Hamburg to Las Vegas today, they usually use a feeder flight from Lufthansa to Frankfurt to switch to the Condor Jet. The prices that Condor pays for this short distance are far cheaper than normal flight tariffs.

Uncertainty factor Lufthansa

Lufthansa could massively increase these tariffs – or stop the agreement altogether. The incentive to do so is great. After all, the German group is currently preparing to build a new low-cost subsidiary that will also serve long-range tourist destinations. It would be conceivable to compete directly against Condor on certain routes. Lufthansa could also put pressure on LOT – and, for example, terminate code-share agreements, i.e. shared flight numbers and seat quotas with partner airlines.

The LOT and the Polish state are far from seeing their end of their expansion. In 2027, a new central airport with up to four runways is to open near Warsaw. Up to 100 million passengers a year are supposed to be routed through here – more than today in Frankfurt.

Whether the Warsaw strategists will ultimately implement their big plans depends on the success of the merger of LOT and Condor. There is great skepticism in the industry.

“I have a déjà-vu right now,” insists one insider: “Etihad’s stake in Air Berlin” How that ended is known: with the hasty exit of the state airline of the United Arab Emirates. And the bankruptcy of the Germans.

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