Lufthansa to Cut 95% of Flights in Survival Mode
We’re tracking the latest on the coronavirus outbreak and the global response.Sign up here for our daily newsletter on what you need to know.
Deutsche Lufthansa AG will cut 95% of capacity, grounding 700 planes, as Europe’s biggest airline confronts the deepening crisis around the coronavirus pandemic.
“The coronavirus has placed the entire global economy and our company in an unprecedented state of emergency,” Chief Executive Officer Carsten Spohr said Thursday. “No one can foresee the consequences. We have to counter this extraordinary situation with drastic and sometimes painful measures.”
Only a handful of flights will survive, some for repatriating Germans stuck abroad and upholding supply chains, he said in an earnings statement which omitted projections for 2020, other than saying profit will fall. Lufthansa is expected to seek a loan from the German government, which could alsotake a stake as part of a rescue package, Bloomberg News reported Friday.
“The longer this crisis lasts, the more likely it is that the future of aviation cannot be guaranteed without state aid,” Spohr said.
Carriers from discounterRyanair Holdings Plc in Europe toQantas Airways Ltd. inAustralia, Emirates in the Gulf andDelta Air Lines Inc.in the U.S. are grounding planes and furloughing workers as the virus puts the industry’s very survival on the line. Governments are working on aid packages, and the airline industry may need$200 billion in support to weather the crisis, according to the International Air Transport Association.
Lufthansa’s Italian arm Air Dolimiti has already halted flights, while theAustrian brand will ground operations later Thursday and a Belgiandivision will follow suit in two days. The Swiss unit isparking planes at a small airport near Zurich.
Capacity cuts will eliminate 60% of airline operating costs, such as fuel, airport fees and passenger-related expenses, according to Lufthansa. Spohr said the company aims to cut fixed costs — those it will still accrue — by one third.
The company is already reducing discretionary spending and offering unpaid leave to employees. Moody’s earlier this weekcut the airline’s credit rating to junk level, saying it needs “extraordinary measures to bolster its liquidity.”
The group won’t pay a dividend for 2019 to preserve cash, which currently stands at 4.3 billion euros ($4.7 billion) plus credit lines of 800 million euros. The carrier has also said it will sell and lease back some aircraft, with its fleet of almost 800 airliners valued at about 10 billion euros.
Source: Read Full Article