Lufthansa posts 1.5 billion-euro loss, steps up measures to cut costs

Lufthansa posted a net loss of $2.44 billion in the second quarter.
Lufthansa posted a net loss of $2.44 billion in the second quarter.PHOTO: REUTERS

FRANKFURT (BLOOMBERG) - Deutsche Lufthansa warned that compulsory dismissals are likely in Germany amid slow progress in talks with unions, stiffening its tone as the carrier braces for years of reduced demand.

Europe's biggest airline posted a net loss of 1.5 billion euros (S$2.44 billion) in the second quarter as the coronavirus pandemic slammed the brakes on travel.

Lufthansa has set a goal of slashing headcount by about 22,000 as it trims its fleet by at least 100 planes to clamp down on expenses and pay back some 9 billion euros in German aid. Like its full-service peers IAG and Air France KLM, the German carrier faces a slow recovery because the long-haul flights it profits from most remain largely idled amid travel restrictions and flareups in the coronavirus pandemic.

"We are experiencing a resetting in global air traffic," chief executive officer Carsten Spohr said in the release. "We do not expect demand to return to pre-crisis levels before 2024."

Lufthansa's workforce is down 8,300 from a year ago, it said in a statement on Thursday (Aug 6). It's aleady detailed moves to cut 20 per cent of management and 1,000 office posts.

Avoiding forced redundancies is no longer realistic even in Germany, where the company had planned to rely on voluntary departures, given the reduction in demand and the slow pace of labor negotiations, Spohr said.

Lufthansa hasn't yet delivered on an earlier package of measures, said Nicoley Baublies, managing director of the UFO cabin-crew union.

"There are two options now: either we carry this package over the line together, or we must push through Lufthansa's necessary promises by dispute," Baublies said. "To threaten forced redundancies is not necessary and even violating contracts as far as cabin crew are concerned."

LOSSES AHEAD

He reported strong progress in re-negotiating the aircraft-delivery schedule and adjusted payments with manufacturers Airbus SE and Boeing Co.

 
 
 

Lufthansa said earnings will be clearly negative in the second half, with a further significant decline in the full-year figure after losing 2.9 billion euros in the first half. Cash flow won't turn positive until some time in 2021.

The report follows huge losses reported last week by Lufthansa's biggest rivals. British Airways owner IAG reported a record loss of 1.36 billion euros, more than the biggest shortfall it previously suffered in a year, while Air France-KLM had a 2.61 billion-euro deficit.

Lufthansa is currently offering about 40 per cent of its usual short-haul capacity and 20 per cent on long-haul routes. Those figures will increase to around 55 per cent and 50 per cent, respectively, in the fourth quarter.

The German carrier is being saddled with a mountain of debt and higher interest payments after tapping 9 billion euros in government aid to avoid insolvency, of which it has received 2.3 billion euros since the start of July.

A sale of assets including a stake in the group's aircraft-maintenance arm and the rest of its in-flight catering business could be one way of reducing the burden, analysts have said, though the group didn't mention disposals in its statement.

 

Shares of Lufthansa have declined 50 per cent so far this year, compared with a 45 per cent decline in the six-member Bloomberg EMEA Airlines Index.