Lufthansa Group prepares for a summer on the ground and a slow start-up phase in autumn

Next 5 May, Lufthansa Group is holding its annual general meeting. Chairman and CEO Carsten Spohr pre-released his speech on the airline group’s website. “We are preparing to spend this summer on the ground and can hope for a proper restart in the autumn at the earliest. However, it is going to be a very slow start-up phase and we expect that global demand will only find its new balance in 2023. It will be new because it will be a balance at a lower level.” 

“In less than 65 days, we have returned to the levels of 65 years ago in terms of air traffic volume,” he added, “That is extremely bitter, devastating and painful.”

• All of the airlines in the Lufthansa Group will be downsized. Older, less environmentally friendly aircraft will be phased out of the fleet earlier than originally planned.
• The A340-600 fleet will be temporarily decommissioned.
• 10 Airbus A320 will be removed from the Eurowings fleet.
• The ongoing restructuring programmes at Austrian Airlines and Brussels Airlines will be intensified. Both airlines will also reduce the size of their fleet within this context.
• “Germanwings flight operations will be terminated two years earlier than planned. In the future, we will be flying with a maximum of 10 airlines of our current airlines.”
• “We will continue to bundle and expand our tourism segment when the restart comes. We were already doing so before the crisis and there will be a greater increase in demand here than for business travel after the crisis. Within the framework of this process, we will be merging the four airlines that have been operating our Eurowings long-haul routes into a single new tourist airline.”
• Eurowings Europe will also be realigned.
• “In addition, we plan to reduce unit costs at all of our companies by twice as much as originally planned: by 2–4% per year instead of the previous 1–2%.“
• The group is in talks with aircraft manufacturers with regard to postponing aircraft deliveries because the group will not be able to return to its old fleet size for an indefinite period.

After the coronavirus crisis, Lufthansa will be a different and smaller Lufthansa. Its fleet will be reduced by about 100 aircraft. As a result, the airline group will have 10,000 employees too many onboard: “We will no longer be able to rule out laying off staff for operational reasons. Unless we find a way to keep as many colleagues as possible onboard using innovative part-time models and our unique blend of Lufthansa solidarity.”

“In order to remain competitive, we want to hold the Lufthansa Group and European airline group together, whatever the scenario. That is our overarching goal,” Spohr will say during the general meeting, “if we want to compete globally against the three major airline groups in the USA, China and the Gulf Region, then we will only be able to do so as a European airline group.”

“We are having intensive talks with the Federal Government and KfW on liquidity support for our company. In addition, we are also negotiating with the governments in Austria and Belgium for help for Austrian Airlines and Brussels Airlines. In the case of SWISS and Edelweiss we have already received assurances from the Swiss Government for a loan that will be guaranteed largely by the Swiss State. The package still has to be approved by parliament, but that is expected at the beginning of May.”

The airline group will not be able to propose a dividend to the Annual General Meeting for the successful year 2019. The Supervisory Board, Executive Board and Senior Management of Lufthansa have voluntarily agreed to waive part of their basic remuneration. And currently, over 80,000 staff of the Lufthansa Group are on reduced working hours. “An indispensable contribution to securing our liquidity,” Spohr will say.

“We have practically no earnings. However, the costs for staff, material, rent or fuel hedging continue. After three record years, we are currently losing about one million euros of our liquidity reserves per hour in operations alone,” Spohr continues.

A side note is that there is currently a high demand for air freight only. In addition to using the entire cargo fleet, Lufthansa has also already operated 70 cargo flights using passenger aircraft. Lufthansa removed the seats from four of its Airbus A330s in order to be able to transport more freight. Additional A330 aircraft are also being modified. Lufthansa calls them “Preighters”, a combination of passenger aircraft and freighter.