Ex-Lufthansa subsidiary LGW declares insolvency due coronavirus

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With cash reserves draining throughout the entire airline industry, another airline joins the list of carriers forced out of business due to the current pandemic. Luftfahrgesellschaft Walter or LGW, as it was better known, declared insolvency in the Düsseldorf Local Court.

The ACMI operator cited the fact that there was “no lasting positive economic perspective for the regional airline,” as Eurowings cut its contract with LGW on short notice. The ACMI operator flew 16 De Havilland Canada DHC-8 Q400 aircraft, out of which 15 were leased to the low-cost carrier.

LGW was a subsidiary of the German airline group Lufthansa (LHAB) (LHA) . The former was acquired after its parent company, Air Berlin (AB1) , declared bankruptcy in 2017. Immediately after acquiring LGW, Lufthansa (LHAB) (LHA) deployed the ACMI airline to bolster Eurowings’ short-haul capacity with 20 DHC-8 Q400 turboprops and 13 Airbus A320 aircraft.

But the official relationship between Eurowings and LGW was short-lived. As low-cost carriers put further pressure on Lufthansa’s (LHAB) (LHA) home soil, the airline group knew it had to do something to counteract the likes of Ryanair. While it ignited a spicy public exchange of words between the two group chief executives, it also forced Lufthansa (LHAB) (LHA) to reposition Eurowings.

Following Lufthansa’s (LHAB) (LHA) Market Capital Days in June 2019, the message was clear: the low-cost carrier was repositioned to focus on short-haul connectivity in Europe, homogenizing its fleet and focusing solely on the Airbus A320 family. As Eurowings was repositioned, Lufthansa (LHAB) (LHA) decided to sell LGW to Zeitfracht Group, a German logistics provider. Following the sale, which was completed in April 2019, LGW and Eurowings entered into a long-term lease agreement, indicated Zeitfracht Group’s press release, thus the ACMI operator’s aircraft were still running under the Eurowings brand.

When the coronavirus outbreak put air travel on hold and airlines were forced to park the majority of their fleet, Lufthansa (LHAB) (LHA) group airlines were no exception to the rule. The managing director of LGW Dominick Wiehage stated that Eurowings parked around “90% of its own fleet” and terminated the wet-lease contract on short notice.

“After the termination of the cooperation by Eurowings, we have made intensive efforts to find employment for our LGW aircraft throughout Europe and will continue to do so in our own management. Due to the almost complete standstill of air traffic, these efforts have unfortunately not been successful so far,” added Wiehage.

The managing director added that it is impossible to determine whether the company would receive public funds “to bridge the period until air traffic resumes,” the decision was made to file for insolvency and enter administration.

 

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