Lufthansa to shrink operations following historic losses
Lufthansa to shrink operations following historic losses

The collapse in demand for air travel during the Covid-19 outbreak led to an 80 per cent drop in revenue at Lufthansa Group in the second quarter.

The aviation giant took just €1.9 billion over the past three months, down from €9.6 billion in the same period last year.

Most of the revenue, some €1.5 billion, was generated by Lufthansa Cargo and Lufthansa Technik.

Lufthansa Group adjusted EBIT for the quarter was – €1.7 billion, down from €754 million last year, despite extensive cost reductions.

Operating expenses were reduced by 59 per cent, primarily through the introduction of short-time working for large parts of the workforce and the cancellation of non-essential expenditure.

The logistics division benefited from stable demand.

In the second quarter, Lufthansa airlines carried 1.7 million passengers, 96 per cent fewer than in the previous year.

Carsten Spohr, chief executive of Deutsche Lufthansa, said: “We are experiencing a caesura in global air traffic.

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“We do not expect demand to return to pre-crisis levels before 2024.

“Especially for long-haul routes there will be no quick recovery.”

He added: “We were able to counteract the effects of the coronavirus pandemic in the first half of the year with strict cost management as well as with the revenues from Lufthansa Technik and Lufthansa Cargo.

“And we are benefitting from the first signs of recovery on tourist routes, especially with our leisure travel offers of the Eurowings and Edelweiss brands.

“Nevertheless, we will not be spared a far-reaching restructuring of our business.”

In the first half of 2020, group revenue fell by 52 per cent to €8.3 billion, while the group reported total losses of €2.9 billion.

Over the same period, the Lufthansa Group of airlines carried a total of 23.5 million passengers, two thirds fewer than in the same period last year.

Capacity decreased by 61 per cent.

Looking Ahead

Following the losses, the airline has unveiled a restructuring programme.

The work includes the loss of 22,000 full-time jobs across the Lufthansa Group, while 100 aircraft will also permanently leave the fleet.

Nevertheless, the airline hopes capacity offered in 2024 will correspond to that of 2019.

To this end, Lufthansa hopes productivity will be increased by 15 per cent by 2023, among other things by reducing the number of the air operators’ certificates to a maximum of ten.

The size of the executive and management boards will also be reduced, while the number of executives in the group will be lowered by 20 per cent.

“We are convinced that the entire aviation industry must adapt to a new normal,” said Spohr.

“The pandemic offers our industry a unique opportunity to recalibrate: to question the status quo and, instead of striving for growth at any price, to create value in a sustainable and responsible way.”

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