Vacation travel: Only the “Mallorca Effect” gives Lufthansa hope

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Lufthansa's business is recovering more slowly than initially hoped.

In the case of the large German airline, which plunged deep into the red in 2020, the bottom line was a further loss in the first quarter - over 1.05 billion euros.

That is half as much as in the same quarter of the previous year at the beginning of the Corona crisis.

Nevertheless, Lufthansa boss Carsten Spohr made it clear that due to ongoing travel restrictions, the capacity forecasts for the year as a whole will be revised downwards.

Instead of up to 50 percent of the pre-corona level, only around 40 percent are expected.

In addition to the downward trend in the fleet, up to 10,000 cabin crew positions could be cut in 2022 after the expiry of dismissal protection agreements.

Not only Lufthansa is urgently waiting for air traffic to normalize again through corona vaccinations of the population and less intervention by the governments.

Worldwide, the airline industry has slipped into the red and was supported by state aid.

To rescue Lufthansa, the federal government got in on a capital injection of 20 percent last year.

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Lufthansa boss Spohr and CFO Remco Steenbergen referred to the wish of many to travel, which would bring the airline more business again.

This was shown by the jump in bookings to Mallorca at Easter.

As soon as travel restrictions fall, there will certainly be this effect.

"The longer the crisis lasts, the greater people's longing to travel again," said Spohr.

In the short term, Lufthansa could then increase its capacities in the summer to 70 percent of the pre-Corona crisis.

Spohr repeated earlier announcements that the Lufthansa Group will in future shrink its fleet from the 800 planned to 650 aircraft, which will then be more modern.

The offer in First and Business Class is to be reduced in favor of more seats in Premium Economy Class.

The reduction of over 25,000 jobs within one year to a good 111,000 employees also contributed to the cost reduction in the group.

One focus was the sale of the activities of the on-board catering group LSG.

No more dumping prices

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Now up to 10,000 jobs could be lost in 2022 if a crisis package with dismissal protection for cabin workers expires next year.

As with previous rounds of job cuts, Spohr pointed out that the number depends on whether personnel costs can otherwise be reduced on a comparable scale.

On the question of the revival of air traffic, Spohr referred to the announcement by EU Commission chief Ursula von der Leyen that it should be possible for Americans to enter the EU again in the summer.

That is a good signal.

The Lufthansa boss expects a decision by the US government "in the next two or three weeks" as to when Europeans can return to the US.

This also depends on vaccination progress in Europe.

In terms of price developments, Spohr dampened hopes of future dumping prices.

In view of the crisis in the industry, the airlines could not afford to give high discounts despite overcapacity.

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In response to an analyst question about the consequences of the Greens participating in a future German government, Spohr drew attention to Austria, where the Greens initially demanded a minimum ticket price of 40 euros last summer.

Similar demands could possibly also be expected in Germany.

Lufthansa's figures for the first quarter reflect the deep slumps caused by the corona crisis.

Sales shrank by 60 percent to 2.56 billion euros, the number of flights by 80 percent to 41,000 and the number of passengers by 86 percent to just over three million.

The loss of 1.05 billion euros was slightly lower than the average forecast of the analysts.

They also expect red numbers for the full year 2021 with a loss of a good two billion euros and then again a mini profit in 2022.

Airbus writes better numbers again

The upcoming Annual General Meeting on May 4th will play a key role in Lufthansa’s finances.

There the possibility for a capital increase (authorized capital) with a nominal amount of up to 5.5 billion euros is to be created.

CFO Steenbergen assumes that the general meeting will approve the step and believes that it can be used this year or next year.

The Lufthansa interim report that has just been submitted states that the Executive Board regards the Group's liquidity as secure for the next 18 months, even with the current uncertainties about the further course of business.

At the end of the quarter, the group still had cash and cash equivalents of 10.6 billion euros.

While Lufthansa is still in the red, Airbus, as one of the main suppliers of the airline, reported significantly better figures again.

The European aircraft manufacturer returned to profitability in the first quarter with a surplus of 362 million euros, after a loss of 481 million euros in the same period of the previous year.

Sales remained stable at 10.5 billion euros.

Airbus boss Guillaume Faury was cautiously optimistic.

He referred to a resumption of air traffic in the Far East and the USA.

Airbus did not change the annual forecast with unchanged production figures compared to 2020. Nevertheless, a new upswing is obviously being prepared behind the scenes.

However, it is being investigated at what speed production could be expanded again, said Faury.

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While Airbus is back in the black, Boeing had reported a loss of the equivalent of 445 million euros for the first quarter.

The Americans are burdened with numerous problems with their models 737Max, 787 and the new 777X.

There are also delays in the completion of the two new Air Force One jumbo jets for the US President.

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