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Lufthansa Plots Course For Leaner Post-COVID-19 Pandemic Future

Published on Jun 16 2021 4:00 PM in General Industry tagged: Germany / Lufthansa / Air Travel

Lufthansa Plots Course For Leaner Post-COVID-19 Pandemic Future

Lufthansa has moved closer to a capital increase, outlining plans for a post-COVID-19 pandemic return to profit as a leaner airline with a smaller fleet and fewer staff. Coronavirus Pandemic Lufthan...

Lufthansa has moved closer to a capital increase, outlining plans for a post-COVID-19 pandemic return to profit as a leaner airline with a smaller fleet and fewer staff.

Coronavirus Pandemic

Lufthansa was pushed to the brink by the coronavirus pandemic in 2020, when travel restrictions led to a collapse in air travel, forcing it to take €9 billion in aid from Germany and its other home countries.

The date and size of the capital raising have yet to be determined, but the company said in a statement late on Monday that banks were already making preparations. Recovery plans also include some disposals.

"We have passed the low point of the crisis," chief executive Carsten Spohr told analysts.

"It's time now to look ahead with confidence," he said, adding that air traffic volumes had improved since April as infection rates had dropped.

Lufthansa said it expected the German state, which owns 20% of the company after last year's bail-out, to consent to the plan, which would not involve another injection of public funds.

In May, shareholders gave approval for the group to raise up to €5 billion, although the company said it would not need the full amount.

Any proceeds could go towards paying back the €6.8 billion state aid given by Germany. Support also came from governments in the airline's other homes - Austria, Belgium, and Switzerland.

Raising Funds

The airline said it planned to raise money from selling its catering business LSG and financial services business Airplus next year, and was considering selling or floating a minority stake in Lufthansa Technik, its aircraft servicing business.

It aims to have an adjusted earnings before interest and taxation (EBIT) margin of at least 8% and an adjusted return on capital employed (ROCE) of at least 10% in 2024. Its adjusted ROCE was –16.7% in 2020 and 6.6% in 2019.

The plans envisage cutting costs by €3.5 billion by 2024 compared to 2019, including a €1.8 billion reduction in staff costs, and a fleet that will be 20% smaller but more efficient.

Investors remain cautious, with shares almost flat on Tuesday.

"We expect investors to greet today's plan with an ounce of caution given the high dependency on labour cost reduction in the plan," Bernstein analyst Daniel Roeska said, adding that the plan was the most comprehensive so far of any European airline.

News by Reuters, edited for Hospitality Ireland by Conor Farrelly. Click subscribe to sign up for the Hospitality Ireland print edition.
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