Covid-19: Lufthansa steps up measures to cut costs

Bloomberg

Deutsche Lufthansa AG warned that compulsory dismissals are likely in Germany amid slow progress in talks with unions, stiffening its tone as it braces for years of reduced demand.
Europe’s biggest airline posted an adjusted operating loss of 1.7 billion euros ($2 billion) in the second quarter — its biggest ever — wrapping up a dismal set of results for carriers in the region after the coronavirus grounded virtually all passenger flights.
Lufthansa has set a goal of slashing 22,000 full-time positions as it trims the fleet by at least 100 planes to clamp down on expenses and pay back some 9 billion euros in state aid. Like full-service peers IAG SA and Air France KLM, the German company faces a slow recovery because the long-haul flights it most profits from remain largely idled amid travel restrictions and flareups in the coronavirus pandemic.
“We are experiencing a resetting in global air traffic,” Chief Executive Officer Carsten Spohr said in the release. “We do not expect demand to return to pre-crisis levels before 2024. Unfortunately, the outlook is clearly worse than expected.”
Avoiding forced redundancies is no longer realistic even in Germany, where the company had planned to rely on voluntary departures, given the reduction in demand and the “disappointingly” slow pace of labour negotiations, Spohr said.
Lufthansa said its workforce is already down 8,300 from a year ago. It has also detailed moves to cut 20% of management and 1,000 office posts.
The reference to forced cuts points to rising tension with unions, which hold considerable clout at German companies, as talks have now taken eight weeks longer than planned while discussions with two of three unions haven’t produced agreements yet.
Spohr said he’s hopeful that a deal with cabin crew that’s due to be put to members of the UFO union can avoid compulsory layoffs, but that forced redundancies among pilots are likely after no agreement was reached. The Vereinigung Cockpit labor group didn’t respond to calls seeking comment.
Lufthansa said earnings will be clearly negative in the second half, with a further significant decline in the full-year
figure after losing 2.9 billion euros in the first half. Cash flow won’t turn positive until sometime in 2021.
Lufthansa is currently offering about 40% of its usual short-haul capacity and 20% on long-haul routes. Those figures will increase to around 55% and 50%, respectively, in the fourth quarter.