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Around 150 machines will be decommissioned and probably much more than the 22,000 jobs planned so far. Currently, the company burns 500 million euros a month.
For a long time, there will be more Lufthansa planes in hangars than there will be in the air.
The aviation industry is as far from recovering from the consequences of the corona pandemic as the German car industry from a complete switch to electric mobility. The number of passengers at Frankfurt airport is currently almost 20% from the previous year. US airports still have about 33%. This development hits Deutsche Lufthansa hard. Since the end of the summer travel season, passenger numbers and bookings have even fallen again, reportedly only 10% of capacity sold for October and the upcoming fall break can hardly be seen in operating business. Group boss Carsten Spohr is now reacting to this with a third savings package as part of the “ReNew” restructuring program.
Large capacity aircraft of the type A380 shut down
The Kranich Group is significantly reducing capacity prospects for passenger airlines, which also include the Eurowings, Swiss, Austrian Airlines and Brussels Airlines brands. In the fourth quarter, the company only expects 20-30% capacity utilization, previously expected to reach 50% of the prior year figure. The long-haul business is almost completely dormant. So far, the company has not provided information on individual affiliates. Also in the medium term, he estimates that the aviation market will recover significantly from the serious consequences of the spread of Covid-19.
Management draws painful consequences for fleet and staff planning from this perspective. Instead of the previously announced closure of 100 of the group’s total of around 760 aircraft, the company is now assuming a permanent capacity reduction across the group of 150 aircraft. The 14 large capacity aircraft of the Airbus A380 type will be completely decommissioned. By spring, 6 of these once famous planes were already parked. The same applies to various A340-600 aircraft. It is extremely questionable whether the machines will come out of long park mode again.
Distrust between unions and management
At the same time, the group has to cut more of its roughly 128,000 jobs than previously planned. So far the management has assumed a calculated overcapacity of 22,000 full-time positions, now the “Handelsblatt” reports 25,000 to 26,000 full-time positions. The company itself does not provide figures, but only talks about the compensation and reduction of excess capacity of the staff should be discussed with the representatives of the responsible workers. Lufthansa is dealing with three striking unions, the Vereinigung Cockpit (VC) pilots’ representation, the Ufo cabin union and the ground crew, who are represented by the United Services Union (Verdi).
The negotiations have already proven very difficult and are now likely to intensify again. There is great mistrust on the part of the unions because they fear that Lufthansa will seize the opportunity to do a major cleanup. The personnel division also includes a more agile management structure with a projected reduction of managerial positions by 20% in the first quarter of 2021.
Group burns 500 million euros per month
For the company, the reduction of the fleet in particular results in a greater need for value adjustments of up to 1.1 billion euros, which will be debited in the third quarter. Currently, the group continues to burn around 500 million euros a month, having reached 700 million euros at the beginning of the pandemic. This outflow of liquidity will be reduced as soon as possible to 400 million euros per month in the winter semester. By mid-2021, the group expects to be able to generate operational cash inflows again. Today, Lufthansa even benefits from the state short-time work allowance, which, according to media reports, saves around 170 million euros per month. The regulation of short-time work applies until the end of next year.
Lufthansa is one of the corporations in Germany hardest hit by the pandemic, with the only worst being the travel giant TUI, which has now received state aid just like “Hansa.” In the summer, the Kranich Group received a total of around € 9 billion in taxpayer money through various channels in its home countries, Germany, Switzerland, Austria and Belgium. However, with the current money burning rate, the funds will be depleted in a few quarters. There is little prospect of improvement. On the contrary: the number of infections is on the rise again, travel restrictions persist around the world, and for Europe travel advisories for various destinations change almost daily. As a result, the administration’s previously gloomy forecasts have proven overly optimistic.
You can contact business editor Michael Rasch Twitter, LinkedIn and Xing, as well as NZZ Frankfurt on Facebook.
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