Lufthansa warns of ‘far-reaching restructuring’ after €9bn rescue

Lufthansa has warned it will be forced to take “far-reaching restructuring measures” and drastically reduce costs, even after securing a €9bn bailout from the German government last week.

The carrier, which swung to a net loss of more than €2bn in the first quarter, said it was burning through €800m a month, and that the reimbursement of cancelled tickets would continue to be a drag.

Europe’s second-largest airline said that subsidiary Brussels Airlines would reduce its workforce by a quarter, while Austrian Airlines would cut staff costs by a fifth. It did not announce how many jobs would be lost at its core Lufthansa brand.

“The scale of the restructuring is immense, and agreement with unions on drastic reductions in staff numbers, wages or both will be difficult to achieve,” said Daniel Roeska, an analyst at Bernstein.

“The company must demonstrate greater skill in these negotiations than ever before.”

The German group, which was forced to ground 700 of its roughly 760 planes in the wake of the Covid-19 outbreak, was slowly increasing its flight schedule, but said it still expected to fly just 40 per cent of its regular timetable in September.

“Even after the end of the crisis, which is expected to end in 2023, the group expects its fleet to remain 100 aircraft smaller,” the Frankfurt-based company said on Wednesday.

Lufthansa revealed it had also booked more than €265m in impairment charges on its fleet, after it decommissioned at least 40 jets, and lost €950m on fuel price hedges, following the collapse of the global oil price.

The group will park roughly 40 per cent of its fleet, or 300 aircraft, in 2021 and 200 aircraft in 2022. 

On Monday, Lufthansa’s supervisory board approved a €9bn rescue package from Berlin, which would see the German government take a 20 per cent stake in the company almost a quarter of a century after it was fully privatised.

As a result of negotiations with the European Commission, Lufthansa will also be forced to relinquish coveted take-off and landing slots at its two hub airports in Frankfurt and Munich.

The bailout, which includes a capital increase, will have to be approved by shareholders at an extraordinary general meeting on June 25.

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