Lufthansa Group is unable to predict how much its profit will fall this year as it confirmed a 95% capacity reduction to battle the coronavirus outbreak.
“At present, no one can foresee the consequences,” notes chief executive Carsten Spohr in a statement accompanying 2019 earnings. “We have to counter this extraordinary situation with drastic and sometimes painful measures.”
Spohr adds that it is the most challenging crisis in the company’s history.
“The longer this crisis lasts, the more likely it is that the future of aviation cannot be guaranteed without state aid,” he states, echoing calls by other airlines worldwide for government help through the coming months.
Capacity has been reduced to 5% of the original plan and the Lufthansa Group is parking approximately 700 of its 763 aircraft, it says.
Lufthansa units Brussels Airlines, Austrian Airlines and Air Dolomiti have already declared that they are suspending operations. The group says Lufthansa itself will discontinue long-haul flying from Munich, leaving long-haul flights only from Frankfurt.
Swiss will fly three times a week to Newark. Only a few European metropolitan areas will be served by short-haul flights from Frankfurt, Munich and Zurich, the group adds.
Lufthansa says it has so far planned around 140 special relief flights to bring people back home, and others will follow.
Freight arm Lufthansa Cargo continues to fly its regular programme, except for mainland China, meaning that its entire freighter fleet of seven Boeing 777Fs, six MD-11Fs and four 777Fs at AeroLogic is still flying.
“In addition, the company is currently examining the possibility of using passenger aircraft without passengers as pure cargo aircraft in order to further increase cargo capacity,” it adds.
Lufthansa Group had revealed an operating profit of €2 billion ($2.2 billion) for 2019 on 13 March, but would not pay shareholders a dividend in an effort to preserve cash amid the coronavirus crisis.
It has disclosed that revenues rose 2.5% to €36.4 billion. Consolidated net profit fell by 44% to €1.2 billion. Unit revenue fell 2.5%, which the group put down to high price pressure amid overcapacity.
For the network airlines – Lufthansa, Swiss and Austrian Airlines – adjusted EBIT was down 26% at €1.8 billion. Lufthansa says in its annual report that this was down to “scrapped aircraft” as well as impairment losses on IT projects, and financial claims related to the insolvency of Thomas Cook Group.
At Eurowings, the operating loss narrowed 28% to €166 million. This includes €44 million of losses attributable to Eurowings long-haul and Brussels Airlines, which will be reported in the Network Airlines division in 2020, the group says.
Lufthansa’s executive board members will waive 20% of their basic pay in 2020 and the company says it is looking at using aircraft financing to provide further liquidity to see it through the crisis.
Credit Suisse had forecast on 16 March that Lufthansa could make an operating loss of €1.5 billion this year and also advocated for Lufthansa to lease aircraft as a way of improving its cash position over the coming months.
Lufthansa says it is seeking to reduce fixed costs by one-third during the crisis, such as by implementing short-term working, asking staff to take unpaid leave, imposing a hiring freeze, and cancelling wet-leases, as well as cutting executive pay.
Finance chief Ulrik Svensson states: ”Lufthansa Group is financially well-equipped to cope with an extraordinary crisis situation such as the current one.”
