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Lufthansa Warns Of Higher Cash Drain And Restructuring Costs In Q4

Published on Nov 5 2020 12:29 PM in General Industry tagged: Lufthansa

Lufthansa Warns Of Higher Cash Drain And Restructuring Costs In Q4

Lufthansa has warned that it will burn through more cash in the fourth quarter than in the third and that further restructuring measures will weigh on its results as it struggles to cope with the effects of the COVID-19 pandemic.

As a result of continuing travel restrictions to curb the virus outbreak, Germany's flagship airline booked a net loss of €2 billion in the third quarter, compared with a profit of €1.2 billion the previous year.

Third-quarter capacity was just 22% of last year's level, leading to an average monthly operating cash drain of €200 million.

As the airline expects even fewer passengers in the winter, it said that that number will grow in October-December, although it will not exceed €350 million. It aims to return to a positive operating cash flow in the course of the coming year.

"We are now at the beginning of a winter that will be hard and challenging for our industry," CEO Carsten Spohr said. "We are determined to use the inevitable restructuring to further expand our relative competitive advantage."

Lufthansa and its subsidiaries Eurowings, Swiss, Austrian and Brussels Airlines are slashing their schedules, fleet and staff, with air travel not expected to recover to pre-pandemic levels before 2025.

The size of the expected restructuring costs will depend on negotiations with trade unions, Lufthansa said. The carrier aims to reduce 22,000 full-time jobs.

Operating expenses were down by 43% in the third quarter from the previous year, helped by significantly lower fuel costs and fees. Sales fell to €2.7 billion from €10.1 billion.

The airline, which secured a €9 billion state bailout in June, said that it has liquidity of €10.1 billion.

Aiming To Increase Capacity

Lufthansa confirmed that it aims to increase capacity to approximately 25% towards the end of the year.

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

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