Shares of Deutsche Lufthansa AG were losing around 3 percent in German trading after the airline reported Thursday a loss in its second quarter, compared to prior year’s profit with collapse in demand for air travel due to the Corona pandemic. Going ahead, the airline projects a clearly negative adjusted EBIT in the second half of 2020 and a further significant decline in adjusted EBIT for the full year.
Carsten Spohr, Chairman of the Executive Board and CEO, said, “We are experiencing a caesura in global air traffic. We do not expect demand to return to pre-crisis levels before 2024. Especially for long-haul routes there will be no quick recovery.”
Citing the expected slow recovery in air travel, Lufthansa also announced steep cost cutting measures under its “ReNew” restructuring program, including the reduction of 22,000 full-time jobs, to ensure global competitiveness after the crisis.
With its cost cutting efforts, the company hopes to refinance the funds of the stabilization package of around 9 billion euros as quickly as possible. The company also projects positive cash flows will be generated again in the course of 2021.
For the third quarter, capacity offered would increase to an average of around 40 percent of the prior year capacity on short- and medium-haul routes and to around 20 percent on long-haul routes. By the end of the year, the company plans to return to 95 percent of the short- and medium-haul and 70 percent of the long-haul destinations.
Under its “ReNew” restructuring programme, Lufthansa would permanently reduce its fleet by at least 100 aircraft. Nevertheless, the capacity offered in 2024 is to correspond to that of 2019. The program also includes the restructuring program already underway at the airlines and service companies.
The company expects to increase productivity by 15 percent by 2023, among other things, by reducing the number of the flight operations or AOCs to a maximum of ten in future.
As part of the planned job cuts, the size of the Executive and Management Boards of the Group companies will be reduced and the number of executives will be lowered by 20 percent. In the administration, 1,000 jobs will be cut.
As of June 30, Lufthansa Group has 129,400 employees, about 8,300 fewer than at the same time last year.
Regarding redundancies, the company said its objective was to avoid them as far as possible, but the goal is no longer realistically within reach for Germany either.
For the second quarter, consolidated net loss was 1.5 billion euros, compared to previous year’s profit of 226 million euros.
Adjusted EBIT was a loss of 1.7 billion euros, compared to prior year’s profit of 754 million euros, despite extensive cost reductions. Operating expenses were reduced by 59 percent.
Meanwhile, the logistics division benefited from stable demand, and Lufthansa Cargo’s Adjusted EBIT was 299 million euros, compared to previous year’s loss of 9 million euros.
Revenues plunged 80 percent to 1.9 billion euros from last year’s 9.6 billion euros due to the collapse in demand for air travel amid the Corona pandemic. Most of the revenue, of 1.5 billion euros, was generated by Lufthansa Cargo and Lufthansa Technik.
In the second quarter, Lufthansa airlines carried 1.7 million passengers, 96 percent fewer than in the previous year. Capacity fell 95 percent. The seat load factor was 56 percent, 27 percentage points below the previous year.
In Germany, Lufthansa shares were trading at 7.97 euros, down 3.29 percent.
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