Lufthansa Group reported a huge Q2 2020 loss and confirmed that it will cut 22,000 jobs from the group, including 14 A380s that will await permanent retirement.
After sacking 8,300 employees in Q12020, Lufthansa Group confirmed in its latest financial statement that 22,000 more are to follow as a part of its “ReNew” program. Out of these, Lufthansa (LHAB) (LHA) only announced the redundancy of 1,000 of administration staff and 20% of its executives while the rest of the positions were left undisclosed in the statement. The combined layoffs of 30,300 employees will amount to 23% of Lufthansa’s (LHAB) (LHA) entire pre-COVID workforce.
“The Group’s objective was to avoid redundancies as far as possible. Against the background of the market developments in global air traffic and based on the course of the negotiations on necessary agreements with the collective bargaining partners, this goal is no longer realistically within reach for Germany either,” reads a statement by the airline group.
Lufthansa (LHAB) (LHA) reported a drop in revenue from €9.6 billion ($11.4) to €1.9 billion ($2.2 billion), which is 80% less than its Q2 2019 result. 79% of the second quarter’s total revenue of €1.5 billion ($1.8 billion) came from Lufthansa Cargo and Lufthansa Technik. The logistics division benefited from stable demand and Lufthansa Cargo’s adjusted earnings before income taxes (EBIT) rose by €308 million ($365 million) fromQ2 of last year.
The final line in the financial statement read a €1.7 billion ($2 billion) loss in Q2 2020. Its total H1 2020 loss was reported as €3.6 billion ($4.2 billion).
Cargo services may prove to be one of Lufthansa’s (LHAB) (LHA) saving grace at the time of the crisis as many airlines seek alternative sources of income.
“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”, commented the chairman and CEO of Lufthansa Carsten Spohr. At the same time, the entire Group suffered a 96% decrease in passenger numbers and 95% in capacity compared to last year’s second quarter.
ReNewing fleet and workforce
In the wake of this, Lufthansa (LHAB) (LHA) looks to cut its combined fleet of 752 by 14 Airbus a380 aircraft as a part of their “ReNew” program.
“By the end of October, more than 380 aircraft will be deployed. This means that half of the Lufthansa Group fleet is once again in the air. Next year there will probably be 300 aircraft on the ground, in 2022 200, and in three years the Lufthansa Group fleet will be 100 aircraft smaller than in 2019. In addition, the first restructuring program included the decommissioning of five 747-400 and eleven A320s of Lufthansa Airlines. The total of 14 A380s have been withdrawn from operations. Seven A380s have been transferred to Teruel, Spain, where the long-haul aircraft have been transferred to deep storage. The remaining seven A380s are in Frankfurt, where they are also being prepared for storage. A concrete date for reuse is still open,” said Lufthansa Group’s representative in an email to AeroTime News.
Operating expenses have declined by 59% through the introduction of part-time working for large parts of the workforce and a reduction in non-essential expenditures. Most of Lufthansa’s (LHAB) (LHA) negative cash outflow, which amounted to a negative €510 million ($604 million), consisted of payment for passenger refund claims, reads the report.
Liquidity as of June 30, 2020, from the airline group’s individual reserves was €2.8 billion ($3.3 billion) compared to €4.2 billion ($5 billion) at the end of Q1 2020. The Federal Republic of Germany has provided the Group with Economic Stabilization Funds of a total of €9 billion ($10.7 billion), which pushed Lufthansa’s (LHAB) (LHA) liquidity to €11.8 billion ($14 billion) as of June 30, 2020.
Since the beginning of July 2020, Lufthansa (LHAB) (LHA) has expanded its short-haul leisure travel network. For the Group, this segment was already a focal point in the strategy before the Coronacrisis. Lufthansa (LHAB) (LHA) expects a buoyant recovery of 95% of short- and medium-haul and 70% of the long-haul flight capacity by the end of 2020.