In its preliminary quarterly report, Lufthansa has revealed plans to operate just 25% of pre-COVID flights for the final quarter of 2020. While Q3 financial results have exceeded expectations, the airline warns of tough times ahead as the coronavirus pandemic continues to decimate the industry.
The airline’s decision comes amid tightening restrictions worldwide as coronavirus cases creep up in many countries. Prior to this, Lufthansa had intended to offer 50% of pre-COVID flights but has since cut that figure in half.
What we know about Lufthansa’s Q4 plans
Lufthansa released a statement on Tuesday detailing its plans for the upcoming quarter, whilst also delving into financial results from Q3. As part of its ongoing efforts to optimize operations during the ongoing pandemic, the airline will:
“Only offer a maximum of 25% of the previous year’s capacity in the fourth quarter to ensure that flight operations continue to generate a positive cash contribution.”
Additionally, Lufthansa is exploring other restructuring strategies to further streamline costs. Having already furloughed its workforce by tens of thousands, the airline has a $10bn government debt it intends to start paying off by the mid-2020s.
“Lufthansa Group is working intensively on restructuring measures in all business segments in order to achieve short and medium-term cost savings and minimize the operating cash outflow.”
Why have they changed course?
Before the latest development, Lufthansa had tentatively committed to offering 50% of its flights from the same period last year. However, after reviewing the economic landscape, the airline has decided to provide a maximum of 25% of flights. The preliminary report goes into the reasoning behind this:
“Demand for air travel is expected to remain low in the coming winter months due to the global evolution of the pandemic and the associated travel restrictions.”
Lufthansa has already implemented a variety of measures to cut down on costs. This includes possibly retiring the entirety of its A380 fleet permanently. The airline is also reeling financially from reimbursing passengers, losing the carrier over €3bn this year.
Lufthansa’s financial results
Financial results in Q3 were better than expected, primarily due to an uptake in demand for summer flights together with cost-cutting measures. Despite reporting losses of €1.3bn for the third quarter, Lufthansa shares rose by 5% to reach €8.41. Lufthansa attributes this to a strong summer showing:
“Payments of €2bn for corona-related flight cancellations were partly offset in the third quarter by cash inflows from the expansion of flight activities in July and August.”
The airline has over €10bn liquidity to draw upon, which it claims places the company “in a position to withstand further burdens from the corona pandemic.” Despite this, Lufthansa’s net debt currently stands at almost €9bn, an increase of over €2bn compared to its end of 2019 figure.
What else can Lufthansa do to stay afloat financially?
