The collapse in air passenger demand caused by the coronavirus pandemic led the Lufthansa Group to a €1.7 billion loss in the second quarter, with revenue down 80 percent year over year.
According to the company's earnings report, the group's airlines carried 1.7 million passengers in Q2—a drop of 96 percent on the previous year. Capacity fell by 95 percent, while the load factor was down 27 percentage points to 56 percent. Despite freight operations propping up revenues of €1.9 billion in the quarter, overall freight capacity fell 54 percent due to reduced passenger flights.
For the first half of the year to June 30, the Lufthansa Group's revenue fell 52 percent to €8.3 billion, leading to a €2.9 billion loss compared with a €418 million profit in 2019.
The figures come despite efforts by the company to cut costs, which yielded a 59 percent reduction in operating costs owing largely to the introduction of short-time working for a large portion of staff and the cancellation of non-essential expenditure.
The Lufthansa Group announced in June that it would have to cut up to 22,000 jobs as a result of the downturn. It has already reduced staffing levels by 8,300 employees and initially hoped to avoid further redundancies but now says further layoffs cannot be ruled out.
According to Lufthansa, the company held €2.8 billion in available liquidity as of 30 June, though this figure does not include the €9 billion in emergency funding provided by the German government and approved by shareholders at the end of June, from which it has only started receiving money since the beginning of July.
The Lufthansa Group said it does not expect passenger demand to return to pre-pandemic levels until 2024 at the earliest. It has therefore launched a comprehensive restructuring program called "ReNew", which includes the previously announced redundancies and a permanent fleet reduction of at least 100 aircraft. However, the group plans to offer the same capacity level as 2019 in 2024.
ReNew also includes an increase in productivity by reducing the number of Air Operator Certificates to a maximum of 10, a 20 percent reduction in the size of the executive and management boards, and 1,000 redundancies through the administration of Deutsche Lufthansa AG.
Chairman and CEO Carsten Spohr commented: "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."
Originally published in BTN Europe.