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Lufthansa vows extensive revamp as losses balloon

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06/03/2020 | 10:31am EDT
FILE PHOTO: Outbreak of the coronavirus disease (COVID-19) in Frankfurt

By Ludwig Burger

Lufthansa has pledged a wide-ranging restructuring, from thousands of job cuts to asset sales, as it seeks to repay a 9 billion euro ($10.1 billion) state bailout and navigate deepening losses in the face of the coronavirus pandemic.

The pledged cost cuts came as the German carrier posted a first-quarter net loss of 2.1 billion euros on Wednesday, only days after securing the bailout that is intended to help the airline ride out the crisis but will require it to cede some of its prized landing slots to rivals.

"In view of the very slow recovery in demand, we must now take far-reaching restructuring measures," said Chief Executive Carsten Spohr.

Job reductions would be "significantly more" than the 10,000 individuals flagged a few weeks ago, Spohr added later on a call with analysts and journalists.

The group, which includes Swiss, Austrian Airlines and Brussels Airlines, is bracing for a significant decline in 2020 earnings and has begun talks with labour representatives over cutbacks, the company added.

The sale of non-core operations is also on the cards in the medium term, the group said, having postponed the planned sale of parts of airline caterer LSG in March.

While Lufthansa retrenches, however, budget rival Wizz Air outlined plans to upgrade its expansion plans, underscoring the contrasting fortunes of airlines grappling with the coronavirus crisis.

Lufthansa's first-quarter loss, which widened from 342 million euros a year earlier, was driven by writedowns of 266 million euros on its fleet. There were also writedowns on the book value of LSG North America and budget carrier Eurowings, of 100 million and 57 million euros respectively.

A slump in fuel hedging contracts was another 950 million euro burden on the bottom line.

Shares in the group were up 4.6% in afternoon trade, though analysts expect the national carrier to be removed from Germany's benchmark blue-chip DAX for the first time since the index was launched in 1988.

Lufthansa's April passenger numbers slumped 98% year on year to 241,000, but it laid out plans on Wednesday to increase capacity in September to reach 40% of what it had scheduled before the pandemic.

(Reporting by Ludwig Burger; additional reporting by Ilona Wissenbach; additonal writing by Tom Sims; Editing by Carmel Crimmins and David Goodman)

Stocks mentioned in the article
ChangeLast1st jan.
AT HOME GROUP INC. -8.15% 5.97 Delayed Quote.8.55%
DAX -0.59% 12540.6 Delayed Quote.-4.77%
JUST GROUP PLC -1.13% 47.46 Delayed Quote.-39.24%
SWISS RE LTD -0.69% 74.6 Delayed Quote.-30.89%
THE NEW HOME COMPANY INC. -7.51% 3.08 Delayed Quote.-33.91%
WILL GROUP, INC. -1.80% 656 End-of-day quote.-47.60%
WIZZ AIR HOLDINGS PLC -4.31% 3236 Delayed Quote.-12.91%
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