LH Group EBIT Q1 2020 by airline unit
Group EBIT -2,676 Billion EUR
This is the ugly EBIT for a Q1 where the first half was barely affected by flight groundings in Europe.
So what happens in Q2?
Fully grounded, EBIT could be about -5 Billion.
Flying empty aircraft for the second half of June, the EBIT could be - 6 Billion.
Now I would like to call your attention to LH Group's balance sheet as of March 31st 2020.
https://investor-relations.lufthansagro ... 20-1-e.pdf
Equity was about 7.5 Billions as of March 31st.
Substract 1.8 Billions of intangibles.
So you have 5.7 Billions of tangible equity.
Add the above loss of 5-6 Billions and LH is not only cash-flow insolvent, but also balance sheet insolvent.
I'm being candid because I'm not touching the 20.5 Billions worth of aircraft, engines and spare parts which can no longer be taken at face value because the market for these has imploded.
Also never mind the fact that LH is probably holding a billion of cash hostage in exchange for vouchers.
So for those of you working for and defending LH, welcome to our new reality. The crane's neck is broken.
You are working for a company on its way to becoming insolvent, if it isn't already.
The German government is going to prop it up with a 3 Billion loan + 7 billion in non-voting shares.
Why? Because if they only give a loan, the equity position doesn't change, they would still be insolvent.
The question now is... how long will the LH balance sheet stay afloat with 7 Billions in equity.
Fully grounded? Probably 2 quarters.
Flying half-empty? Probably 1 quarter.
Does a loan help LH's situation?
No, they need equity.
So what does this mean for SN and a Belgian State Aid?
Even if it were a loan, the 290-390 Millions could be wasted money by the end of the year as the whole Group could be bankrupt by then.
Newsflash: lending money to a business on its way to bankruptcy is very risky.
So much for loaning money at 0% and lending it for 4%.
If LH Group goes bankrupt in the long chain of bankruptcies that is awaiting, it's going to end up being loaning at 0% and lending at -100%.
If SN splits from LH in the future, propping them up now will only strengthen a future competitor, which would be a foolish move.
Politically, propping up a foreign-owned company today will look very bad, when domestic businesses are failing.
We can't save every subsidiary of a foreign company operating in Belgium.
If you start with SN, where will it end?
If you're going to have to give a similar-sized state aid to the entire BEL20 and BEL-mid, Audi Brussels, Toyota Europe, Volvo Trucks, Accor Hotels, Quick, McDonald's, Carrefour, Lidl, Aldi etc... it's Belgium NV/SA that is going to be bankrupt.
SN employs 4000 in Belgium, big deal.
Colruyt alone employs close to 30.000.
As much as you love to give me the finger, you know that I've been right more often than not in the past, so stay real.