Lufthansa has decided to terminate all operational activities of its 2002 incepted, low-cost subsidiary, Germanwings, and to considerably reduce its own passenger fleet as traveling came to a halt, needing years to reach pre-Covid-19 levels. Meanwhile, talks are taking place between the airline and the Berlin government regarding arrangements for financial support. Almost simultaneously to the Executive Board’s restructuring decisions, a Lufthansa Cargo B777 freighter landed in Munich, loaded with 8 million China-produced face masks. Air freight is currently the only business that runs smoothly for the Group.
Covid-19 has hit global aviation extremely hard, and that includes Europe’s leading airline, Lufthansa. Just how hard was evidenced yesterday (7APR20) when members of its Executive Board applied
the emergency brake, ceasing all activities of its low-cost subsidiary Germanwings by permanently grounding its fleet of 30 jetliners. Officially, the carrier is not dissolved but it takes little
fantasy to predict its exitus.
The Germanwings measure affects 1,400 employees, most of whom will be offered alternative jobs within the Lufthansa Group of Airlines. Discussions with the trade unions to find suitable solutions are currently underway.
Reduced travel demand calls for fleet adaption
In addition to the Germanwings decision, Lufthansa itself will substantially scale down its fleet of passenger aircraft, by taking 6 A380s, 18 long-haul aircraft, predominantly B747s and A340s, and 11 medium range jetliners out of service. Eurowings’ loss-making long-haul network will also be significantly cut back.
Simultaneously to the reduction of flight capacity, the carrier’s administration and that of its Group members Austrian Airlines, Swiss Air Lines, Eurowings, Lufthansa CityLine and Brussels Airlines will also be downsized and streamlined, as part of the new Covid-19 savings program.
The decisions taken come as result of forecasts, foreseeing a sharp drop in demand for air travel in post corona crisis times. According to Lufthansa CEO Carsten Spohr, it will take months until global travel restrictions are completely lifted and even years until the worldwide demand for air travel returns to pre-crisis levels.
Sharply declined market value
Following the announcement, Lufthansa shares gained 1.1% and closed at 8.75 euros. Since the beginning of the year, the airline's share price has halved.
Prior to the worsening of the corona pandemic and the closure of air space decreed by most countries, Lufthansa had built up capital and liquidity buffers of around five billion euros. However, since then, revenues have dramatically plummeted. Instead, large sums of money had to be spent for the reimbursement of flight tickets. Personnel costs have already been reduced by putting more than 90,000 of its 138,000 employees on short-time work.
Today (8APR20), Hamburg-based Lufthansa Technik AG announced short-time work until 31AUG20 for their 12,000 employees in Germany. Globally, there are only a few passenger aircraft still operating, leading to a sharp reduction of maintenance work, Lufthansa Technik said.
Lufthansa Cargo operates at full steam
In contrast to the rather gloomy news produced by the Group’s passenger units lately, Lufthansa Cargo operates at full swing. Its 17 all-cargo units are currently utilized 24/7, and pax aircraft converted to temporary freighters are complementing the transport service. This week, a total of 25 such flights will be conducted, with a further 60 cargo flights using passenger aircraft planned for next week.
Freighters are needed to carry large or voluminous consignments, such as ‘Olá Brazil’, a Lufthansa Cargo operated Boeing 777F that landed in Munich yesterday afternoon (7APR20) with 8 million respiratory masks on board. It had departed from Shanghai bearing an order from the Bavarian government to equip hospitals and doctors’ surgeries with Covid-19 protection.
Cargo is bearer of hope
Carsten Spohr, Chairman of the Executive Board and CEO of Deutsche Lufthansa AG personally welcomed ‘Olé Brazil’ at MUC, stating: "Especially now, cargo flights are of the utmost importance for medical facilities, but also for manufacturers and large corporations. We are doing everything we can to maintain supply chains during this crisis and ensure that people receive sufficient supplies. This is an important part of our corporate responsibility as a leading European aviation group."
For a change, it was a positive message the Lufthansa helmsman was able to deliver after he had announced the end of Germanwings and other stiff restructuring measures just a few hours before.
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