Lufthansa weighs faster plane retirements after record loss
Lufthansa may permanently ground more jets to emerge leaner from the coronavirus pandemic, the German airline group said on Thursday, as it reported a record 6.7 billion euro ($8.10 billion) loss for 2020.
The group, which also owns Austrian Airlines and the Swiss and Eurowings brands, trimmed its 2021 capacity plans as Covid-19 disruption drags on, but held out hope for a summer upturn.
"We are examining whether all aircraft older than 25 years will remain on the ground permanently," Chief Executive Carsten Spohr said, pledging to make 2021 "a year of redimensioning and modernisation" for the company.
Lufthansa reported a 1.14 billion-euro ($1.38 billion) fourth-quarter net loss with a 1.29 billion deficit in adjusted earnings before interest and tax (EBIT). Revenue fell 71% to 2.59 billion euros.
Its shares were down 0.4% at 12.73 euros as of 0841 GMT in Frankfurt, after gaining nearly 15% since the start of the year on recovery hopes.
Bernstein analyst Daniel Roeska said that despite "tangible progress" on cost-cutting at its airline subsidiaries, "Lufthansa mainline is still stuck at step one" with short-term crisis union agreements.
"More needs to happen - and faster," Roeska said.
Lufthansa cut its global workforce by 20% to 110,000 in 2020 and is seeking to eliminate another 10,000 German jobs or equivalent wage costs.
The group, which received a government-backed 9 billion euro bailout last June, said it will operate at 40-50% of pre-crisis capacity this year, down from an earlier 40-60% forecast.
Summer travel will nonetheless pick up swiftly whenever restrictions are eased, Spohr said, and Lufthansa stands ready to restore 70% of its flight schedule "in the short term".
The group's full-year net loss of 6.73 billion euros was on 13.59 billion euros in revenue, down 63%. The company predicted a narrower 2021 EBIT loss than last year's 5.45 billion euros.
Analysts had expected losses of 6.63 billion euros for 2020 and 1.24 billion euros for the last three months, according to Lufthansa's consensus polling.
The airline group has outlined plans to cut its fleet to 650 planes in 2023 and phase out ageing Boeing 747-400s and Airbus 340-600s. A slower recovery means more grounded planes may never return to service before retirement.
Operating cash burn was reduced to 300 million euros per month in the fourth quarter and is expected to remain stable at that level in the first three months of 2021, the company said.
Like many airline peers, Lufthansa posted record 2020 cargo profits as mass aircraft groundings squeezed capacity and sent freight prices soaring. Divisional adjusted EBIT jumped to 772 million euros from 1 million, dwarfed by passenger losses.
Net debt increased to 9.9 billion euros as of Dec. 31 from 6.7 billion a year earlier, while total liquidity stood at 10.6 billion euros including 5.7 billion euros in unused aid.
"We have sufficient liquidity to withstand a market environment that remains difficult," Chief Financial Officer Remco Steenbergen said.
($1 = 0.8305 euros)
