A passenger walks past a Lufthansa ticket counter at Frankfurt Airport in Frankfurt, Germany, September 21 2020. Picture: REUTERS/RALPH ORLOWSKI
A passenger walks past a Lufthansa ticket counter at Frankfurt Airport in Frankfurt, Germany, September 21 2020. Picture: REUTERS/RALPH ORLOWSKI

Europe’s largest airline is accelerating fleet and staff cuts amid mounting concern about the severity of the slump in global travel.

Deutsche Lufthansa will slim down by 150 jets by the middle of the decade, 50 more than previously planned, the German group said Monday. That could cost the equivalent of 5,000 posts on top of 22,000 that are already going, since the carrier believes each plane supports about 100 workers.

Lufthansa said it will record an impairment of €1.1bn this quarter against the value of grounded aircraft.

The fleet move is the most dramatic yet among European airlines that are rethinking recovery plans as the coronavirus continues to rage across the region. A hoped-for surge in late summer bookings failed to materialise, and with many nations still limiting travel through quarantines and other measures, carriers are beginning to hunker down for a long-term depression in demand.

“The outlook for international air traffic has significantly worsened in recent weeks,” Lufthansa said. “With the summer travel season coming to an end, passenger and booking figures are declining again.”

Lufthansa shares fell as much as 8.8%, the biggest intraday decline since June 11, and were trading 8% lower at €7.92 in Frankfurt. That takes the decline in 2020 to 52%.

The company said it will now bring back only 20% to 30% of capacity by the end of the fourth quarter, down from a target of half previously.

In addition to fleet changes already announced, seven Airbus A340-600s will be retired, with 10 more, together with eight A380 superjumbos, to be reactivated only in the event of “an unexpectedly rapid market recovery”.

Remaining four-engines jets including fleets of Boeing 747 jumbos and smaller A340-300s are not affected.

While global air travel is suffering its worst-ever contraction, Lufthansa is more exposed than many carriers because of a reliance on long-haul and business markets that are still largely grounded by the pandemic. The company is burning through half a billion euros in cash each month, a figure it plans to trim to €400m by winter through “strict cost management”.

Lufthansa has started to fire staff in the US and China, cutting its workforce by more than 8,000 by June 30. It has so far shied away from dismissals in Germany, despite estimating that half the original cuts would fall there, saying it wants to reach deals to pare costs while holding on to most workers.

The extension of state furloughs through 2021 has also made it economically less beneficial to offload German staff, partly masking the extent of problems at a carrier that will need to repay a €9bn state bailout.

Still, Lufthansa said it will reduce administrative office space by 30% in Germany as it conducts a worldwide review, while confirming plans for a 20% cut in management posts be implemented in the first quarter of next year.

Bloomberg

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