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The Lufthansa Group has lost 99.1% of passengers due to the coronavirus, had to cancel 3,000 flights per day, it registers “practically no profit” and will leave almost the entire fleet ashore at least until October, hoping that the sector Some signs of recovery in the fall are shown. In any case, normal traffic levels should be registered no earlier than 2023 and at that time the German giant of the skies will be a European group of companies, but smaller. This is what CEO Carsten Spohr will say at the next shareholders’ meeting to be held on May 5 in an early speech to the media. Meanwhile, the company will also have to survive with the support of the government, but without its entry into management to preserve management freedom.
Passengers collapsed by 99.1%
A 13-page speech that paints a troubling and frank scenario. “We are fighting for the future of this company and its 130,000 employees and we are doing everything we can to maintain as many as possible,” says Spohr. It will not be easy at all. If in 2019 the group, which also includes Swiss, Austrian Airlines, Brussels Airlines, Eurowings and the Italian Air Dolomiti, carried an average of 350,000 passengers per day “at the time we board around 3,000,” Spohr estimates. This underscores how, in operational terms, “our company went back in time to 1955, when we started, a decade after the end of World War II.” “In less than 65 days we returned to the levels of 65 years ago – explains the CEO -: this is extremely devastating and painful.”
1,200 million losses in three months.
The rescue plan for one of the world’s largest sky giants is divided into three phases. The first, the “grounding” plan, provides for the grounding of some 700 aircraft (out of a total of 760), the cancellation of three thousand daily flights, the operational closure of Air Dolomiti, Austrian Airlines and Brussels Airlines (from March). With 1% of passengers compared to the same period in 2019, this translates, Spohr explains, into missing earnings, while personnel, materials, rentals and fuel costs remain. “After a record three years, we are now consuming around one million euros an hour from our cash register just for operations.” From January to March, the Lufthansa Group records net losses of 1.2 billion euros, 13.2 million per day, “and the second quarter will be worse,” Spohr anticipates.
Out of government by management
In the second phase, the “recovery” phase, the CEO announces that “nobody knows when we can take off again.” “We hope that part of our fleet will spend the summer ashore and hope that it will restart no sooner than fall.” During this period, all the companies in the group will be reduced to better adapt to a more restricted market. Through the oldest and most polluting planes, a clean cut of at least 100 planes, a further reduction in costs and 10,000 more employees who risk losing their jobs. In the third phase, “new normal”, the group must be managed taking into account the financial support of the government not only of Germany, but also of Switzerland (as regards Switzerland), Austria (for Austrian Airlines) and Belgium (for Brussels airlines). But institutional support should not become an operational barrier, Spohr warns. “We need your support, but not the government administration.” Lufthansa, recalls the CEO, “was successfully privatized in 1997” because of this “it is important for us to maintain business freedom in decision-making.”
