The Lufthansa Group has reported a €2.1 billion loss for the
first quarter of 2020, revealing the harsh impact of the coronavirus pandemic
on global airlines.
Travel restrictions imposed to limit the spread of the virus
forced the group’s airlines to ground the majority of flights, which caused
revenue to fall by 18 per cent to €6.4 billion. According to the company, cost
reduction measures could only partially offset the decline, leading to earnings
dropping to minus €1.2 billion.
One of the biggest hits Lufthansa took in the quarter was
the market value degradation of fuel, with hedging causing a negative impact of
€950 million.
The group’s airlines carried 26.1 per cent fewer passengers
in the first three months of 2020 compared to the same quarter last year, with
load factor falling 4.7 percentage points to 73.3 per cent. In April, the
company recorded a 98.1 per cent drop in passenger numbers.
Lufthansa’s executive and advisory boards have recently
approved a €9 billion support package from the German government that will see
its airlines have to give up to 24 take-off and landing slots at Frankfurt and
Munich for new rivals to bid on. The deal is awaiting shareholder and EU
approval.
Despite the liquidity boost, Thorsten Dirks, member of the
executive board digital and finance at Deutsche Lufthansa AG, said a
restructuring will be needed to secure the group’s future. “In order to repay
the loans and coupons quickly, we will have to significantly increase our
annual free cash flow compares to pre-crisis levels – even though global demand
for flights will remain below pre-crisis levels for years to come,” Dirks said.
“This will only succeed if we implement restructuring programmes in all areas
of the group and agree on innovative solutions with the unions and working
councils.”
The company’s airlines have already announced they will
downsize their fleets to cut capacity as they prepare for a slow return of
demand, and it now expects to still have 300 aircraft grounded in 2021 and 200
in 2022.
However, the group’s airlines will be ramping up services
this month and it hopes to operate up to 40 per cent of its original schedule
in September.