Lufthansa warns of compulsory dismissals as it posts $2.4b loss

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

Europe's biggest airline posted a net loss of €1.5 billion (S$2.4 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 in German aid.

"We are experiencing a resetting in global air traffic," chief executive Carsten Spohr said in a 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 yesterday. It has already 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 labour negotiations, Mr Spohr said.

Lufthansa has not yet delivered on an earlier package of measures, said Mr 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. To threaten forced redundancies is not necessary, and is even violating contracts as far as cabin crew are concerned," he said.

He reported strong progress in renegotiating the aircraft-delivery schedule and adjusted payments with manufacturers Airbus and Boeing.

Lufthansa said earnings will be clearly negative in the second half of the year, with a further significant decline in the full-year figure, after losing €2.9 billion in the first half. Cash flow will not turn positive until some time next year.

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, more than the biggest shortfall it previously suffered in a year, while Air France-KLM had a €2.61 billion 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 in government aid to avoid insolvency, of which it has received €2.3 billion since the start of last month.

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A version of this article appeared in the print edition of The Straits Times on August 07, 2020, with the headline 'Lufthansa warns of compulsory dismissals as it posts $2.4b loss'. Print Edition | Subscribe