Category Archives: Lufthansa Group

Lufthansa Group to be first to implement Star Alliance Biometrics and usher in a touchless customer experience at airports

Lufthansa Group has made this announcement:

Star Alliance, the world’s largest airline alliance, has completed development of an interoperable biometric identity and identification platform that will significantly improve the travel experience for frequent flyer programme customers of Star Alliance member airlines.

The Star Alliance Biometrics platform advances the vision of Star Alliance member airlines of delivering a seamless customer journey, while strengthening loyalty value proposition within its travel ecosystem.

Lufthansa Group (LHG) airlines, Lufthansa (a founding member of Star Alliance) and SWISS will be the first to use Star Alliance Biometrics for selected flights starting in November. Specific infrastructure is being installed at hub airports Frankfurt and Munich, reaping operational benefits at both locations.

Members of the Lufthansa and SWISS Miles & More Frequent Flyer Program who opt-in to biometrics will be able to pass through both security access and boarding gates in a touchless manner, an important health and hygiene safety measure in times of COVID-19.

In keeping with the requirement to wear masks in the airport terminal, it is not required to remove the mask for the biometric identity check. The identification process works for passengers wearing masks.

The Star Alliance Biometrics service is built upon NEC Corporation’s NEC I:Delight biometric and identity management platform software. The secure service is available at no cost to customers of the Miles & More program who have consented to share their biometric data with stakeholders of their choice during travel.

How does enrolment work?

Effective immediately, and with a few easy steps on their mobile device, Miles & More customers will have the option to enrol in Star Alliance Biometrics, accessed via a link within the Lufthansa app. Customers enrolling are asked to take a selfie, verify their identity with their passport, and opt-in to the airlines and airports where they want to use the service.

Enrol once, use often

They only need to enrol once and can then use their biometrics data multiple times at biometrics touchpoints of any participating airport whenever they travel with a Star Alliance member airline who has implemented Star Alliance Biometrics.

Data privacy and security

Personal data, such as photo and other identification details, are encrypted and safely stored within the platform. From the outset, the system has been designed in compliance with applicable data protection laws making use of the latest facial recognition technology. Storage of personal data is kept to a minimum – for example, no customer names are stored.

A list of Frequently Asked Questions can be found attached.

Jeffrey Goh, CEO of Star Alliance stated: “We are exceedingly proud to have founding member Lufthansa as the first airline to implement the Star Alliance Biometrics solution in both of its Frankfurt and Munich Airport hubs. This is a customer-centric solution that furthers our credentials in innovation, particularly its multi-airline and multi-airport capability. Whilst it offers a seamless customer travel experience, it is also a critical development that addresses the expectation of customers for a more touchless and hygienically safer experience. Star Alliance Biometrics is a key part of our strategy to be the most digitally advanced global airline alliance.”

Christina Foerster, Member of the Board, Customer, IT & Corporate Responsibility, said “The topic of biometrics will become increasingly important when travelling in the future. Especially during the pandemic, such touchless processes at the airport are a big plus. In the Lufthansa Group, biometric technology and solutions will increasingly ensure simplified and more efficient processes at airports, thereby significantly improving the travel experience of our passengers. I am very pleased that with Star Alliance Biometrics we will be able to offer interested frequent flyers biometric security checkpoint access and boarding via facial recognition at our Frankfurt and Munich hubs as from November. This is an important milestone for us. ”

“Optimizing travel processes for passengers is our top priority at Frankfurt Airport, and biometric processes offer our customers numerous advantages. Star Alliance Biometrics now creates a more efficient and – especially important in today’s times – touchless passenger journey, which offers greater security as well as more comfort and less waiting time. We are proud to be one of the first airports worldwide to offer this pioneering technology for boarding pass control and individual gates in Terminal 1 – Area A, together with our most important customers Star Alliance and Lufthansa. In the coming weeks and months we will gradually expand the range – also to new process points such as baggage drop-off,” says Dr. Pierre Dominique Prümm, Board Member Aviation and Infrastructure at Fraport AG.

“Biometrics offers us the opportunity to further accelerate and simplify processes at Munich Airport for the benefit of travelers”, said Jost Lammers, CEO of Munich Airport. “This not only increases passenger comfort, but also – thanks to the contactless process – hygiene standards and health protection. In this way, we are once again fulfilling our promise of quality as the only 5-star-airport in Europe.”

Lufthansa Group reports adjusted EBIT of minus EUR 1.3 billion in the third quarter

Lufthansa Group issued this financial statement:

The global coronavirus pandemic continued to have a considerable impact on the Lufthansa Group’s earnings development in the third quarter. However, compared to the second quarter, losses were reduced due to substantial cost savings and an expansion of the flight schedule in the summer months of July and August. Adjusted earnings (Adjusted EBIT) amounted to minus EUR 1.3 billion (previous year: plus EUR 1.3 billion). The average monthly operating cash drain, before changes in working capital and investments, was EUR 200 million. In the same period, sales fell to EUR 2.7 billion (previous year: EUR 10.1 billion). Net income was minus EUR 2 billion (previous year: plus EUR 1.2 billion). Operating expenses were cut by 43 percent in the third quarter compared to the previous year, partly as a result of significantly lower fuel costs, fees and a reduction in other costs that vary based on the extent of flight operations. Using short-time work for a large portion of the personnel in combination with other measures resulted in a reduction of fixed costs by more than a third. In addition, strict liquidity management limited the cash outflows.

“Strict cost savings and the expansion of our flight program enabled us to significantly reduce the operating cash drain in the third quarter, compared to the previous quarter. Lufthansa Cargo also contributed to this with a strong performance and a positive result of EUR 169 million. We are determined to keep following this path. We want to return to a positive operating cash flow in the course of the coming year. In order to achieve this, we are advancing restructuring programs throughout the Group with the aim to make the Lufthansa Group sustainably more efficient in all areas,” said Carsten Spohr, CEO of Deutsche Lufthansa AG.

First nine months of 2020

In the first nine months of this year, the Lufthansa Group generated revenues of EUR 11 billion (previous year: EUR 28 billion). Adjusted EBIT in this period was minus EUR 4.1 billion (previous year: plus EUR 1.7 billion). Net profit was minus EUR 5.6 billion (previous year: plus EUR 1 billion). The result was impacted by non-cash special items. This included, among other things, impairment losses of EUR 1.4 billion on 110 aircraft or rights of use, which are not expected to resume operations.

Cash flow and liquidity development

At the end of September, the Lufthansa Group had EUR 10.1 billion of cash at its disposal. This figure includes stabilization measures in Germany, Switzerland, Austria and Belgium totaling EUR 6.3 billion, which have not yet been utilized.

Free cash flow adjusted for the IFRS 16 effect was minus EUR 2.1 billion in the third quarter (previous year: EUR 416 million), mainly due to customer reimbursements of ticket costs for corona-related flight cancellations amounting to EUR 2 billion. This was partially offset by cash inflows from the expansion of flight activities in July and August, which were mainly driven by short-term bookings. In the first nine months, Adjusted free cash flow was significantly less negative than the operating result. It fell to minus EUR 2.6 billion (previous year: plus EUR 685 million). A 63 percent reduction of investments to EUR 1 billion (previous year: EUR 2.8 billion) made a major contribution to this.

Net debt at the end of the third quarter was EUR 8.9 billion (December 31, 2019: EUR 6.7 billion). The equity ratio fell by 15.4 percentage points to 8.6 percent, compared to the end of 2019 (December 31, 2019: 24 percent).

Business areas

The Adjusted EBIT of Network Airlines in the first nine months amounted to minus EUR 3.7 billion. Eurowings recorded a loss of EUR 466 million.

The development of the Logistics business segment stood out positively from the rest of the Group. Despite a 36 percent decline in freight capacity, triggered by a loss of freight capacity in passenger aircraft (“bellies”), Lufthansa Cargo’s revenue rose by 4 percent in the first nine months. This positive development was driven by the operation of one of the largest and most modern freighter fleets, comprising of 13 Boeing B777Fs (incl. Aerologic) and six MD-11s. Yields increased in all regions, also due to the global loss of cargo capacity in passenger aircraft. Earnings after nine months rose to EUR 446 million (previous year: minus 33 EUR million).

In contrast, Lufthansa Technik’s result for the same period fell to minus EUR 208 million (previous year: plus EUR 351 million). The result of the LSG Group was also burdened by the worldwide decline in air traffic and the associated decrease in demand for catering services, falling to minus EUR 269 million (previous year: plus EUR 93 million) in the first three quarters.

Traffic development in the third quarter of 2020

In the third quarter of 2020 the Lufthansa Group airlines carried 8.7 million passengers, 20 percent of previous year. Offered capacity fell to 22 percent of the previous year’s level. The seat load factor was at 53 percent, 33 percentage points below the previous year’s figure. Freight capacity fell by 47 percent due to a lack of capacity on passenger aircraft. The decline in freight kilometres sold was 34 percent. This reflects a 14-percentage point higher cargo load factor of 73 percent.

Traffic development in the first nine months of 2020

In the first nine months, the Lufthansa Group airlines carried a total of 32.2 million passengers, 29 percent of last year’s period. Offered capacity fell to 33 percent of the previous year’s level. At 68 percent, the seat load factor in this period was 15 percentage points lower than last year. Freight capacity fell by 40 percent and freight kilometres sold fell by 33 percent. This resulted in a 7-percentage point higher cargo load factor of 68 percent.

Outlook

“People around the world have a great desire to travel again soon. Together with our partners, we are ready and will do everything we can to fulfil this desire as quickly as possible and with the highest health and safety standards. The important thing now is to ensure health protection and freedom of travel, for example by means of widespread rapid tests,” says Carsten Spohr.

In the upcoming winter months, demand for air travel is expected to remain low due to the global increase of infection rates and the associated travel restrictions. The airlines of the Lufthansa Group will therefore be adjusting their original planning and will offer a maximum of 25 percent of last year’s capacity from October to December. This consistent capacity reduction will ensure that flight operations continue to make a positive contribution to earnings. The Lufthansa Group is benefiting from its hub strategy, which enables it to offer connections that would otherwise be uneconomical as point-to-point connections during this current market environment. Network Airlines benefit from bundling passenger streams at the Group’s hub airports.

In order to adjust to the long-term changes in the market, the Lufthansa Group is implementing extensive restructuring measures in all business units. In the fourth quarter, the Group expects this to result in non-cash one time and restructuring expenses. Their amount depends primarily on the further progress of negotiations with the social partners. The effects will be booked in Adjusted EBIT, for which a significant year-on-year decline is expected.

The average monthly operating cash drain, excluding changes in working capital, capital expenditure and one-off and restructuring expenses, is expected to be limited to around EUR 350 million in the fourth quarter. Adjusted free cash flow is expected to decline less in the fourth quarter compared to the third quarter due to a significantly lower volume of ticket refunds.

The Group remains on track for returning to a positive operating cash flow during the course of 2021. The prerequisite for this is that the pandemic situation allows for an increase in capacity to around 50% of pre-crisis levels.

A decision has been taken to significantly scale back operations for the upcoming winter months. In the winter flight schedule, 125 fewer aircraft will be operating than originally planned. In administrative areas, only activities that are necessary for operations, legally required or related to the necessary restructuring will take place.

“We are now at the beginning of a winter that will be hard and challenging for our industry. We are determined to use the inevitable restructuring to further expand our relative competitive advantage. We aspire to remain the leading European airline group following the end of the crisis,” says Carsten Spohr.

Lufthansa Group January – September July – September
2020 2019 Δ 2020 2019 Δ
Total revenue Mio. EUR 10,995 27,524 -60% 2,660 10,108 ‐74%
of which traffic revenue Mio. EUR 7,404 21,405 -65% 1,763 8,030 -78%
EBIT Mio. EUR ‐5,857 1,637 ‐2,389 1,220
Adjusted EBIT Mio. EUR ‐4,161 1,715 ‐1,262 1,297
Net profit/loss Mio. EUR ‐5,584 1,038 ‐1,967 1,154
Earnings per share EUR ‐10.79 2.18 ‐3.80 2.43
Total Assets Mio. EUR 39,010 44,187 -12%
Operating cash flow Mio. EUR -1,598 3,735 -1,961 1,342
Capital expenditures (gross) Mio. EUR 1,023 2,785 -63% 126 881 -86%
Adjusted free cash flow Mio. EUR -2,579 685 -2,069 416
Adjusted EBIT-margin in % -37.8 6.2 -44.0 pts. -47.4 12.8 -60.2 pts.
Employees as of 30.09. 124,534 138,350 -10%

 

Lufthansa Group reports preliminary results for the third quarter

Lufthansa Group has made this announcement:

The coronavirus crisis continued to have a considerable impact on Lufthansa Group’s earnings development in the third quarter of 2020. However, due to an expansion of the flight schedule in the summer months of July and August and considerable cost reductions, losses were reduced compared to the second quarter. On a preliminary basis, Adjusted EBIT in the third quarter was EUR -1,262 million (previous year: EUR 1,297 million). After nine months, the operating loss was EUR -4,161 million (previous year: EUR 1,715 million).

The Adjusted free cash flow for the first nine months of 2020 amounted to EUR -2,579 million (previous year: EUR 685 million). In the third quarter, Adjusted free cash flow was EUR -2,069 million (previous year: EUR 416 million). Payments of EUR 2.0 billion 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 Group also benefited from strict working capital management and the postponement of tax payments. Net debt at the end of the third quarter was EUR 8,930 million (December 31, 2019: EUR 6,662 million).

At the end of September, the Group had liquidity of EUR 10.1 billion at its disposal. This figure includes undrawn funds from the EUR 9 billion stabilization packages from Germany, Switzerland, Austria and Belgium. Out of those, EUR 6.3 billion are still available.

The Group is also in a position to withstand further burdens from the corona pandemic. 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. According to current planning, the Group’s airlines 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. At the same time, 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.

Coronavirus testing at Frankfurt Airport

Lufthansa Group has made this announcement:

With the school start in Baden-Wuerttemberg the summer travel season ends in whole Germany. At the end of the summer, CENTOGENE and Lufthansa are taking a positive interim balance of the test centers at German airports. Since the end of June, the partners have been jointly enabling passengers departing from or arriving at Frankfurt Airport (FRA), as well as those from the region, to have access to fast, reliable tests for the SARS CoV-2 virus. This first “walk-in” coronavirus test center in Germany serves as a blueprint for a successful test concept and helps passengers entering Germany from high-risk countries.

In the summer of 2020, more than 150,000 passengers were tested at Frankfurt Airport using CENTOGENE’s highly sensitive SARS-CoV-2 PCR test. On average, about one percent of the samples were positive during the last six weeks. Over 97 percent of the COVID-19 test results were digitally transmitted to passengers in August 2020 in less than 24 hours. Passengers who had registered for the test in advance only had to wait approx. 20 minutes before being tested. Most of them came from Spain, followed by the USA, Turkey and Croatia. In addition, almost 50,000 passengers were tested before departure, for example to travel to China or Dubai, where a negative test result is mandatory for entry. The general population from the region also used the test center. Since mid-August, another test center has also been in operation at Hamburg Airport.

Most recently, the testing capacity at the test center at Frankfurt has been expanded and the sampling area has been enlarged to provide a convenient option for travelers. The test center in Frankfurt now has a capacity of around 10,000 tests per day, which is more than sufficient even at times of high demand. On average, around 4,500 tests per day were carried out in the summer months of July and August. The CENTOGENE service complements the existing public laboratory capacities of the health care system and relieves them.

Lufthansa Group passengers can now also use the fast lane at the CENTOGENE test center at Frankfurt Airport and thus keep waiting times to a minimum. Special fast lanes are also available for Lufthansa Group status customers, business and first class travellers.

“It is correct that the testing strategy for travellers from high-risk countries will be maintained in September. Instead of abolishing the tests from October and dismantling the successfully established testing infrastructure at airports, the existing testing capacities should be further expanded and used even more extensively. The data obtained from the tests can make a significant contribution to reacting to the current infection situation with targeted and appropriate measures. The cooperation between Lufthansa and CENTOGENE, which is continuously expanding its capacities, serves as a benchmark for a successful test model here,” says Christina Foerster, Lufthansa Group Customer, IT & Corporate Responsibility Board Member.

Dr. Volkmar Weckesser, CIO CENTOGENE, emphasizes: “We firmly believe that broad-based testing is the key to preventing a further outbreak and supporting a new normal – especially where mobility is an essential contribution to the efficiency of our economy. This is why we have introduced efficient, digital workflows for COVID-19 testing at two of Germany’s largest airports. We are absolutely convinced that this decision is correct and will therefore continue to significantly increase our testing capacities. In this way, we can make an important contribution to the testing infrastructure – also for medical personnel or the population in the region. Above all, thanks to the latest technology and innovation, we are also working intensively on new, faster test methods.

Passengers can perform the test in a sample collection center in the immediate vicinity of the main terminal of Frankfurt Airport. All results are made available to passengers via a secure digital platform and linked to the flight ticket to ensure automated confirmation for travelers flying to countries with respective entry restrictions. In addition, passengers can choose an identity confirmation service that certifies authorities that the test results match the passengers’ identity.

Lufthansa Group restricts exceptions from compulsory masks

Lufthansa Group has made this announcement:

The airlines of the Lufthansa Group are restricting the exceptions from the obligation to wear a mask on board their flights. From September 1, 2020, an exemption from the obligation to wear a mask during the flight for medical reasons will only be possible if a medical certificate is presented on a form provided by the airline. Passengers can download the document from the airlines’ websites. In addition, passengers who are unable to wear a mask during the flight must present a negative covid-19 test, which is not older than 48 hours at the scheduled begin of the journey. This ensures maximum safety for the passengers travelling with them.

As of today, passengers will be comprehensively informed about the new requirements, including on the airlines’ websites and social media channels, as well as via e-mail and via SMS. This is intended to give customers the opportunity to adapt to the changed rules in good time.

The airlines in the Lufthansa Group already introduced compulsory masks on board their flights at the beginning of May, making them one of the first airlines worldwide to do so. Exceptions to this rule were previously only possible with a medical certificate. The new rules on the compulsory wearing of masks now ensure even better protection for all passengers.

The airlines in the Lufthansa Group have introduced extensive hygiene measures on board and on the ground. They are also in close contact with the European Aviation Safety Agency (EASA), the European Centre for Disease Prevention and Control (ECDC) and national authorities to promote the ongoing development and harmonization of health standards in air transport during the corona pandemic.

In principle, the risk of contracting the on board of an aircraft is very low. The cabins are equipped with filters that clean the air of contaminants such as dust, bacteria and viruses.

Consequences of Coronavirus pandemic have a considerable impact on Lufthansa result

Lufthansa Group has made this announcement:

  • Adjusted EBIT declines to minus 1.7 billion euros in the second quarter despite significant cost reductions
  • Comprehensive “ReNew” restructuring programme to ensure global competitiveness after the crisis
  • Lufthansa Cargo with strong second quarter
  • Number of employees already reduced by 8,300 – redundancies no longer ruled out in Germany as well
  • Normalization of demand to pre-crisis level expected for 2024 at the earliest

The collapse in demand for air travel due to the Coronavirus pandemic led to an 80 percent drop in revenue for the Lufthansa Group in the second quarter to 1.9 billion euros (previous year: 9.6 billion euros). Most of the revenue (1.5 billion euros) was generated by Lufthansa Cargo and Lufthansa Technik.

The Lufthansa Group Adjusted EBIT in the quarter under review amounted to minus 1.7 billion euros (previous year: 754 million euros), despite extensive cost reductions. Operating expenses were reduced by 59 percent, primarily through the introduction of short-time working for large parts of the workforce and the cancellation of non-essential expenditures. However, these measures were only partially able to compensate for the decline in sales. The consolidated net income of Lufthansa Group for the months April to June amounted to minus 1.5 billion euros (previous year: 226 million euros).

The logistics division benefited from stable demand. The loss of cargo capacity in passenger aircraft (“bellies”) led to a significant increase in yields. Lufthansa Cargo’s Adjusted EBIT thus rose to 299 million euros (previous year: minus 9 million euros).

First half of 2020 
In the entire first half of 2020, Lufthansa Group revenue fell by 52 percent to 8.3 billion euros (previous year: 17.4 billion euros). Adjusted EBIT amounted to minus 2.9 billion euros (previous year: 418 million euros) and EBIT to minus 3.5 billion euros (previous year: 417 million euros). The difference between the two figures is mainly due to depreciation on aircraft and aircraft usage rights amounting to 300 million euros, goodwill impairments totaling 157 million euros and the impairment of joint venture holdings in the MRO segment totaling 62 million euros.

In addition, the negative market value development of fuel cost hedging contracts had a negative impact of 782 million euros on the financial result in the first six months of the year. Compared with the first quarter, this effect decreased by 205 million euros. The Lufthansa Group net result for the first half of the year thus amounted to minus 3.6 billion euros (previous year: minus 116 million euros).

Traffic development in the second quarter of 2020
In the second quarter of 2020, the Lufthansa Group airlines carried 1.7 million passengers, 96 percent fewer than in the previous year. Capacity fell by 95 percent. The seat load factor was 56 percent, 27 percentage points below the previous year’s figure. Freight capacity offered fell by 54 percent due to a lack of capacity on passenger aircraft. The decline in freight kilometers sold was 47 percent. This reflects an increase in cargo load factor by 10 percentage points, to 71 percent.

Traffic development in the first half of 2020
In the first six months, the Lufthansa Group airlines carried a total of 23.5 million passengers, two thirds fewer than in the same period last year (minus 66 percent). Capacity decreased by 61 percent. The seat load factor fell by 9 percentage points to 72 percent in the period. Freight capacity offered fell by 36 percent and cargo kilometres sold by 32 percent. This resulted in an increase in cargo load factor by 4 percentage points to 66 percent.

Cash flow and liquidity development
Capital expenditure fell to 897 million euros (previous year: 1,904 million euros) in the first half of the year, mainly due to postponing planned aircraft deliveries, with only 127 million euros of capital expenditure in the second quarter. The drastic reduction in capital expenditure, the Group-wide focus on securing liquidity and strict working capital management limited the cash outflow despite the significant drop in earnings. The adjusted free cash flow for the first half of the year thus amounted to minus 510 million euros (previous year: 269 million euros). Net debt increased by 10 percent compared with the end of 2019, to 7.3 billion euros.

Centrally available liquidity amounted to 2.8 billion euros on June 30, a decrease of 1.4 billion euros compared with the end of the first quarter (31 March 2020: 4.2 billion euros).

The funds agreed with the Economic Stabilization Fund of the Federal Republic of Germany (WSF) to stabilize Lufthansa Group are not yet included in the liquidity figures as of 30 June 2020. Including these funds amounting to 9 billion euros, the Group had a total of 11.8 billion euros in liquidity available as of 30 June 2020.

Since the beginning of July, the Group has received 2.3 billion euros from the stabilization package. As a result of the capital increase, with which the WSF has acquired a 20 percent stake in the company’s share capital, the Lufthansa Group received cash of around 300 million euros. The release of the first instalment of the KfW (Kreditanstalt für Wiederaufbau) loan contributed one billion euros, and the establishment of the WSF’s Silent Participation II provided a further one billion euros.

Cash outflows since the balance sheet date related primarily to the payment of refund claims for cancelled flights. In July, the Group paid out just under one billion euros. In total, the Group has so far reimbursed around two billion euros to customers in the current year 2020.

Lufthansa Group decides on “ReNew” restructuring program
The Group currently expects demand for air travel to return to pre-crisis levels in 2024 at the earliest. Lufthansa Group has therefore decided on a comprehensive restructuring programme entitled “ReNew”, which also includes the restructuring program already underway at the airlines and service companies.

The aim remains to maintain the global competitiveness and future viability of the Lufthansa Group. The program includes the reduction of 22,000 full-time jobs in the Lufthansa Group. The Group’s fleet is to be permanently reduced by at least 100 aircraft. Nevertheless, the capacity offered in 2024 is to correspond to that of 2019. To this end, productivity is supposed to be increased by 15 percent by 2023, among other things by reducing the number of the flight operations (AOCs) to a maximum of ten in future. The size of the Executive and Management Boards of the Group companies will be reduced and the number of executives in the Group is supposed to be lowered by 20 percent. In the administration of Deutsche Lufthansa AG, 1,000 jobs will be cut. The sum of these measures should make it possible to refinance the funds of the stabilization package as quickly as possible. The financial planning of Lufthansa Group stipulates that positive cash flows will be generated again in the course of 2021. Lufthansa Group currently (as of 30 June 2020) has 129,400 employees, about 8,300 fewer than at the same time last year. The Group’s objective was to avoid redundancies as far as possible. Against the background of the market developments in global air traffic and based on the course of the negotiations on necessary agreements with the collective bargaining partners, this goal is no longer realistically within reach for Germany either.

Carsten Spohr, Chairman of the Executive Board and CEO of Deutsche Lufthansa AG, said: “We are experiencing a caesura in global air traffic. We do not expect demand to return to pre-crisis levels before 2024. Especially for long-haul routes there will be no quick recovery.

We were able to counteract the effects of the coronavirus pandemic in the first half of the year with strict cost management as well as with the revenues from Lufthansa Technik and Lufthansa Cargo. And we are benefitting from the first signs of recovery on tourist routes, especially with our leisure travel offers of the Eurowings and Edelweiss brands. Nevertheless, we will not be spared a far-reaching restructuring of our business.

We are convinced that the entire aviation industry must adapt to a new normal. The pandemic offers our industry a unique opportunity to recalibrate: to question the status quo and, instead of striving for “growth at any price”, to create value in a sustainable and responsible way.”

Outlook
Since the beginning of July, the Group has further expanded its flight program. This primarily concerns short-haul leisure travel. Lufthansa Group had already made the expansion of its market position in this segment a focal point of its strategy before the Corona crisis. The airlines Eurowings and Edelweiss play an important role in this context.

In July, the Group gradually increased its offering to around 20 percent of the previous year’s level, with load factors of over 70 percent in European short-haul traffic.

In the third quarter, capacity offered is planned to increase to an average of around 40 percent of the prior year capacity on short- and medium-haul routes and to around 20 percent on long-haul routes. In the fourth quarter, capacity is planned to further increase to an average of around 55 percent (short- and medium-haul) and around 50 percent (long-haul). With this, the Group plans to return to 95 percent of the short- and medium-haul and 70 percent of the long-haul destinations by the end of the year. Thanks to a high degree of flexibility in supply and capacity planning, this figure can also vary at short notice.

Despite the capacity expansion, the Lufthansa Group also expects a clearly negative Adjusted EBIT in the second half of 2020 and thus a further significant decline in Adjusted EBIT for the full year. This reflects the expectation that important long-haul routes will continue to be served only to a very limited extent due to ongoing travel restrictions.

Lufthansa announces “ReNew” restructuring program, Germanwings will not return

Lufthansa has made this announcement:

The Executive Board of Deutsche Lufthansa AG has approved a second set of measures as part of its overall restructuring program in the wake of the coronavirus crisis. With the first set of measures launched in early April it had been decided, among other things, to reduce the fleet by 100 aircraft and not to resume the flight operations of Germanwings.

Following the approval by Lufthansa shareholders of the stabilization measures of the German federal government and the commitments made by the governments of Austria and Switzerland, the Group’s financing is currently secure.

However, the complete repayment of government loans and investments, including interest payments, will place an additional burden on the company in the coming years, making sustainable cost reductions inevitable for this reason as well.

The comprehensive restructuring program entitled “ReNew” is scheduled to run 
until December 2023 and is headed by Dr. Detlef Kayser, Member of the Lufthansa Group Executive Board and responsible for Airline Resources & Operations
Standards. It also includes restructuring programs that are already underway at the Group’s airlines and service companies. These will continue unchanged.

In detail, the following resolutions were adopted by the Group Executive Board and communicated internally:

  • Following the downsizing of the Executive Board of Deutsche Lufthansa AG, the executive board and management bodies of the subsidiaries will be reduced in size compared with 2019. In a first step, the number of board members was reduced by one position each at Lufthansa Cargo AG, LSG Group, and Lufthansa Aviation Training.
  • Government loans and equity participations are to be reduced as quickly as possible to avoid a further increase in interest charges (restructuring program element “RePay”).
  • The number of leadership positions throughout the Group will be reduced by 20 percent.
  • The administration of Deutsche Lufthansa AG will be reduced by 1,000 positions.
  • The process of transforming Lufthansa Airline into a separate corporate entity is being accelerated.
  • The already planned reduction of sub-fleets and the bundling of flight operations will be implemented. This measure includes the long- and short-haul leisure business at the Frankfurt and Munich hubs. At Lufthansa alone, 22 aircraft have already been phased out ahead of schedule, including six Airbus A380, eleven Airbus A320 and five Boeing 747-400 aircraft.

Copyright Photo: Marcel F. De Biasi.

  • The financial planning up to 2023 provides for the acceptance of a maximum of 80 new aircraft into the Lufthansa Group carriers’ fleets. This will reduce the investment volume for new aircraft by half.

Due to the long-term effects of the coronavirus pandemic, which are particularly serious for air travel, there is a calculated personnel surplus of at least 22,000 full-time positions in the companies of Lufthansa Group even in the period following the crisis. Nearly all airlines worldwide are currently affected by personnel surplus. In contrast to many of its competitors, Lufthansa will continue to avoid layoffs wherever possible. This requires agreements on crisis-related measures with unions and social partners representing the Lufthansa employees. So far, negotiations have only been successful with the UFO cabin union.

Germanwings

From Wikipedia:

Since 2016, Germanwings has been a wet lease operator for its sister company Eurowings. The Germanwings brand has not been used since then, although the IATA code “4U” continued to operate under the Eurowings brand until March 2018, when Germanwings’ own IATA-Code 4U was abandoned and replaced with the Eurowings designator EW. Germanwings was closed in April 2020.

On April 7, 2020, Lufthansa previously announced that it would be shutting down Germanwings, partly due to the large travel ban during the COVID-19 pandemic.

Germanwings aircraft photo gallery:

Germanwings aircraft slide show:

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Lufthansa Group shareholders pave the way for stabilization measures

Lufthansa Group has made this announcement:

On June 25, the shareholders of Deutsche Lufthansa AG voted in favor of accepting the capital measures and the participation of the Economic Stabilization Fund (WSF) of the Federal Republic of Germany in Deutsche Lufthansa AG. The corresponding proposal received the necessary majority at today’s Extraordinary General Meeting of the company.

The package provides for stabilization measures and loans of up to 9 billion euros. The WSF will make silent capital contributions of up to 5.7 billion euros to the assets of Deutsche Lufthansa AG. It will also establish a 20 percent stake in the share capital of Deutsche Lufthansa AG by way of a capital increase. This capital increase was approved at today’s Extraordinary General Meeting. The shareholders also voted in favor of granting two conversion rights for parts of the silent capital contributions. These conversion rights are intended, on the one hand, to safeguard the Federal Government in case of a takeover of Lufthansa and, on the other hand, to secure the interest payments for the silent capital contribution. Both conversion rights can be transformed into a further five percent of the company’s share capital should these conditions be met. The package will be supplemented by a loan of up to 3 billion euros with the participation of KfW and private banks.

Carsten Spohr, Chairman of the Executive Board of Deutsche Lufthansa AG says: “The decision of our shareholders provides Lufthansa with a perspective for a successful future. On behalf of our 138,000 employees, I would like to thank the German federal government and the governments of our other home countries for their willingness to stabilize us. We at Lufthansa are aware of our responsibility to pay back the up to 9 billion euros to the taxpayers as quickly as possible.”

As a result of the resolution of the Extraordinary General Meeting, the company’s liquidity is secured on a sustained basis. The companies of Lufthansa Group are working at full speed to get their operations up and running again. The airlines’ flight schedules will therefore be consistently expanded in the coming weeks. The flight schedule for the next few weeks will be published at the beginning of next week. The plan is to include 90 percent of all originally planned short-haul destinations and 70 percent of all long-haul destinations in the flight schedule again by September. 

Around 30,000 shareholders attended the Extraordinary General Meeting. A total of 39.0 percent of the share capital was represented. Of these, 98 percent of the capital present voted to accept the company’s proposed resolution. This means that far more than the necessary two-thirds majority voted in favor of adoption.

The European Commission had already approved the stabilization package before the start of the Extraordinary General Meeting.

A decision on the approval of the stabilization measures in the other home markets of Lufthansa Group will be made in the near future.

In other news, Lufthansa and the Independent Flight Attendants’ Union (UFO) have agreed on June 24, on a package of measures amounting to more than half a billion euros to counter the economic effects of the crisis.

The package of measures includes the suspension of pay increases, a reduction in flying hours with a corresponding reduction in pay and temporary reductions in contributions to the company pension scheme.

Additionally, both parties have agreed on a package of voluntary measures and severance programs. These include unpaid leave, voluntary measures to further reduce working hours, and the subsidized, early transfer to a company pension scenario.

“This agreement is an important signal to our employees, our shareholders and today’s Extraordinary General Meeting. In this way, we want to avoid redundancies in Lufthansa cabins,” said Michael Niggemann, Executive Board Member Human Resources and Legal Affairs of Deutsche Lufthansa AG. “We also see this deal as a sign of a regained and constructive social partnership with the UFO.”

Nicoley Baublies, UFO chief negotiator, sums up: “The agreement that has now been reached for Lufthansa cabin staff provides the urgently needed job security. In the current crisis, such contributions, which imply security but also cuts for every cabin employee, will hopefully lead to a clear approval of the rescue package of the German government at today’s Annual General Meeting. The coming months will be very challenging for us as social partners. With this package and the other solutions that we have found together, we are finally placing our social partnership on a new and visible foundation.”

With the crisis package that has now been agreed upon, the company will be able to avoid layoffs for the 22,000 cabin staff of Deutsche Lufthansa AG during the crisis. The agreements reached still require the approval of the UFO members.

Lufthansa Group airlines significantly expands flight schedule until September

Lufthansa Group has made this announcement:

A350
  • 90 percent of short and medium-haul routes back on offer by September
  • 70 percent of long-haul destinations back on offer by September
  • Further expansion of leisure destinations

The airlines in the Lufthansa Group are significantly expanding their services in the coming weeks and months. This applies to both short-haul and long-haul flights. The focus in expanding flight schedules is to again offer as many destinations as possible.

In September, for example, 90 percent of all originally planned short- and medium-haul destinations and 70 percent of long-haul destinations will be served again. Customers planning their autumn and winter holidays now have access to a comprehensive global network of connections via all hubs of the Group.

The core brand Lufthansa alone will be flying more than 100 times a week to destinations in North America via its hubs in Frankfurt and Munich in autumn. Around 90 flights a week are planned to Asia, over 20 to the Middle East and over 25 to Africa. In Africa, for example, there will again be flights to Windhoek and Nairobi, in the Middle East to Beirut and Riyadh, in North America to Houston, Boston and Vancouver, in Asia to Hong Kong and Singapore.

On short- and medium-haul routes, Lufthansa will offer a total of 1,800 weekly connections from September onwards. There will be 102 destinations from Frankfurt and 88 from Munich, including Malaga, Alicante, Valencia, Naples, Rhodes, Palermo, Faro, Madeira, Olbia, Dubrovnik, Reykjavik and many other summer destinations from Frankfurt.

Lufthansa expanded its service concept on June 1, 2020. Customers receive a disinfecting wipe before every flight. On short- and medium-haul flights in Business Class, the beverage service and the normal meal service will be reactivated. On long-haul flights, guests in all classes will again be offered the usual range of beverages. In First and Business Class, customers will once again be able to choose from a range of dishes. In Economy Class, customers will also continue to receive a meal. Strict hygiene regulations continue to be adhered to during the service adjustments.

From July onwards, Austrian Airlines aircraft will take off on regular long-haul flights for the first time since mid-March. Bangkok, Chicago, New York (Newark) and Washington will then be available with up to three weekly flights. The European network offer will also be expanded to include various routes from July onwards – including flights to Greece.

Swiss plans to return to about 85% of the destinations it served before the Coronavirus crisis in autumn, with about one-third of its capacity on these routes. As Switzerland’s airline, Swiss is committed to offering the widest possible range of services in the build-up phase. The initial focus here will be on European services from Zurich and Geneva. Further intercontinental destinations will also be reintroduced into the route network.

Eurowings is also significantly expanding its flight program for both business and leisure travelers and plans to fly to 80 per cent of its destinations again in the course of the summer. Following the lifting of the travel warning, interest in holiday destinations such as Italy, Spain, Greece and Croatia in particular is growing by leaps and bounds. This is why Eurowings will be putting 30 to 40 percent of its flight capacity back into the air in July – with the main focus on flights from Düsseldorf, Hamburg, Stuttgart and Cologne/Bonn.

When planning their trip, customers should take the current entry and quarantine regulations of the respective destinations into account. Throughout the entire trip, restrictions may be imposed due to stricter hygiene and safety regulations, for example, due to longer waiting times at airport security checkpoints.

From June 8 onwards, guests on all Lufthansa and Eurowings flights are obliged to wear a mouth and nose cover on board throughout the entire journey. This serves the safety of all passengers on board. The General Conditions of Carriage (GTC) will be amended accordingly. Lufthansa also recommends that passengers wear a mouth-nose cover during the entire journey, i.e. also before or after the flight at the airport, whenever the required minimum distance cannot be guaranteed without restriction.

Lufthansa aircraft photo gallery:

 

Drastic decline in air travel significantly affects Lufthansa Group’s quarterly result

  • Lufthansa Group concludes first quarter with adjusted EBIT of minus 1.2 billion euros
  • Fixed cost development in line with target of a reduction by one third given in March
  • Restructuring necessary to repay loans and deposits as quickly as possible
  • Capacity will increase from 3 percent of original planning in May to up to 40 percent in September

“Global air traffic has come to a virtual standstill in recent months. This has impacted our quarterly results to an unprecedented extent. In view of the very slow recovery in demand, we must now take far-reaching restructuring measures to counteract this,” said Carsten Spohr, Chairman of the Executive Board of Deutsche Lufthansa AG.

First quarter 2020

The company is reporting today on the results for the first quarter of 2020, the publication of which was originally scheduled for April 30 and had been postponed due to the effects of the corona crisis. The most important key figures have already been reported in an ad hoc release on April 23.

The travel restrictions imposed due to the global spread of the coronavirus have significantly impacted the Lufthansa Group’s earnings development in the first quarter of 2020. Group revenue in the first quarter fell by 18 per cent to 6.4 billion euros (previous year: 7.8 billion euros). Cost reductions could only partially offset the revenue decline in the quarter. Adjusted EBIT amounted to minus 1.2 billion euros in the first quarter of 2020 (prior year: minus EUR 336 million). Net profit amounted to minus 2.1 billion euros.

Crisis-related asset impairments and the negative development of the value of fuel hedges had a significant negative impact on net profit in the quarter. The Group recorded impairment charges of 266 million euros on decommissioned aircraft and 157 million euros on the goodwill of LSG North America (minus 100 million) and Eurowings (minus 57 million). The negative market value development of fuel cost hedges had a negative impact of 950 million euros on the financial result in the first three months of the year. 60 million related to hedges that expired in the first quarter and had a corresponding cash relevant negative impact on earnings. The remainder reflects the valuation of hedges expiring in the future as of March 31. Adjusted free cash flow amounted to 620 million euros. Compared with the end of 2019, the equity ratio fell by 6.7 percentage points to 17.3 percent and net debt by 5 percent to 6.4 billion euros. Pension provisions amounted to 7.0 billion euros. They were thus 5 percent higher than at the end of the year.

Traffic development

In total, the airlines in the Lufthansa Group carried 21.8 million passengers in the first three months, around a quarter less than in the same quarter last year (- 26.1 percent). The seat load factor fell by 4.7 percentage points to 73.3 per cent during this period. Freight capacity on offer fell by 15 percent and freight kilometers sold by 15.5 percent. This results in a cargo load factor of 62.5 percent, which is 0.4 percentage points lower.

In April, the Lufthansa Group airlines recorded a 98.1 percent year-on-year decline in passenger numbers to 241,000. Supply fell by 96.0 percent. The seat load factor fell by 35.8 percentage points to 47.5 percent. Freight supply was 60.7 percent lower than in April 2019, in particular due to a lack of capacity on passenger flights. By contrast, freight kilometers sold declined by only 53.1 percent, so that the cargo load factor rose by 11.5 percentage points to 71.5 percent. Passenger and freight volumes in May were again significantly lower than in the previous year.

Liquidity development

The state support measures secure the solvency of the company until it is able to generate sufficient funds from its own resources. On 31 March 2020, the Lufthansa Group’s liquidity amounted to around 4.3 billion euros.

“We have succeeded in reducing fixed costs by one third within a short period of time. Nevertheless, in our operating business we are currently consuming around 800 million euros of our liquidity reserve per month. In addition, the reimbursement of cancelled airline tickets and the repayment of financial liabilities that have fallen due will have a foreseeable negative impact on our liquidity development,” said Thorsten Dirks, Member of the Executive Board Digital and Finance at Deutsche Lufthansa AG.

Lufthansa Group initiates comprehensive restructuring

“In order to repay the loans and coupons quickly, we will have to significantly increase our annual free cash flow compared to pre-crisis levels – even though global demand for flights will remain below pre-crisis levels for years to come. This will only succeed if we implement restructuring programs in all areas of the Group and agree on innovative solutions with the unions and working councils,” says Thorsten Dirks.

The Lufthansa Group plans to significantly reduce unit costs compared with pre-crisis levels. Among other things, fixed costs have been reduced by short-time working for around 87,000 employees, the postponement or cancellation of planned projects and the postponement of maintenance events. In addition, ongoing restructuring programs at Austrian Airlines and Brussels Airlines are being further intensified. Brussels Airlines plans to reduce its fleet by 30 percent and its workforce by 25 percent. Austrian Airlines has decided to reduce its capacity in the long term by downsizing its fleet by 20 percent, and has agreed with the working councils to cut personnel costs by around 20 percent. Restructuring and cost-cutting programs will also be launched in other Lufthansa Group companies. Negotiations with aircraft manufacturers on extensive postponements of planned aircraft takeovers are continuing. In addition, the sale of individual non-core business units is being examined in the medium term.

Capacity development

The reduction in traffic performance by over 95 percent in the months of April and May resulted in the Group initially parking 700 of its 763 aircraft.

From mid-June, however, the Lufthansa Group’s airlines will be significantly expanding their schedules to around 2,000 weekly connections to more than 130 destinations worldwide. The aim is to make as many destinations accessible again for holidaymakers and business travellers. Yesterday the Executive Board decided to increase the offered capacity in September by up to 40 percent of the original schedule. At the same time, the number of destinations will increase to 70 percent of the original plan for long-haul flights and 90 percent for short-haul flights in order to offer customers the widest possible choice of destinations. To this end, a step-by-step expansion of the flight schedule is now being worked out over the next three months. In doing so, the company will accelerate the course it has already embarked on to expand its tourist offering.

The company is planning on only gradually increasing demand. It still expects 300 aircraft parked in 2021, and 200 in 2022. Even after the end of the crisis, which is expected to end in 2023, the Group expects its fleet to remain 100 aircraft smaller. A considerable decline in demand is also initially expected for the service companies’ third-party business.

The airlines in the Lufthansa Group have prepared themselves for rising demand with extensive hygiene measures and the introduction of mandatory masks on board. To give their customers maximum flexibility in the corona crisis, the Lufthansa Group airlines continue to offer their customers numerous rebooking options. In addition, capacities in the call centres are being continually expanded so that customers who cancel their flight can be reimbursed as quickly as possible. This should enable ticket refunds in the three-digit million range per month. Due to the high number of refund requests, waiting times may still occur.

Results Forecast

The uncertain further development of the corona pandemic continues to make it impossible to make a precise forecast of the earnings trend for 2020. The Lufthansa Group continues to expect a significant decline in Adjusted EBIT.

“Even in this unique crisis we are working hard to defend our leading position in Europe,” said Carsten Spohr.