Lufthansa - Current situation - Covid19

Lufthansa – the “crane” in hibernation

Reiner Hertl
01.12.2020
5 minutes

The crane in winter mode – economic belt-tightening, cost-cutting, hibernation

Lufthansa, like the entire industry, remains severely affected by the pandemic. Many things remain highly uncertain for the next few quarters. How efficient are the savings programs proving to be? The need to further reduce costs is a challenge for all sides. And after the recovery tendencies in the summer, the second wave of coronavirus is now in full swing: a severe winter.

“Hibernation” and winter flight schedule – a hard landing for Lufthansa

In winter flight operations 20/21, the airlines of the Lufthansa Group could offer a maximum of a quarter of their previous year’s capacity (half of this was originally planned). The number of passengers will probably be less than a fifth of last year’s figure, the Lufthansa executive board told employees. He continued: “We must therefore intensify our efforts to date to reduce costs even further”. In the meantime, the group is losing half a million euros per hour, only half as much as at the beginning of the crisis…

Nevertheless, nothing has changed in the dramatic nature of the situation.

CEO Carsten Spohr and his colleagues to the employees on the introduction of the winter flight schedule

For example, if we had taken a look at the Lufthansa home base, departure hall A on Frankfurt Rhein-Main Airport in late autumn, there would have been little to see. Another example, glancing to Bremen: The legendary flight school – one of the European Flight Academy locations of the Lufthansa Group – is being downsized. The Lufthansa headquarters LAC, located directly at Frankfurt Airport, is in cost-saving “winter mode” and is also partially closed.

How and when it will be possible to move further up from “on the ground” was also discussed at an aviation summit:

The situation before the “Aviation Summit” November 2020

Despite its own massive economic troubles, the crane airline is still in a relatively good position compared to others in the German aviation industry, thanks mainly to the austerity measures and state aid. Germany, Austria, Belgium and Switzerland provide Lufthansa with nine billion euros in financial aid. With a convertible bond announced in mid-November, the airline intends to raise fresh money, more than half a billion euros.

For the broad-based aviation group, the airfreight business was profitable in the pandemic year. The full freight capacity is worthwhile to some extent – in combination with tourists on board again in due course. On which they will count when the authorities worldwide relax travel restrictions again. The use of tests and the dismantling of quarantine obligations should make this possible (the aviation association IATA is also working towards this).

At the aviation summit itself, the main focus was on saving the airports that are also under threat. As an “important sign and first step”, the politicians must now reimburse the airports for the costs incurred in the first lockdown by keeping the infrastructure open, said Ralph Beisel of the German Airports Association ADV.

Current situation airports - Covid19

Even now, in a partial lockdown, another cost reimbursement issue remains a tiresome ongoing topic at Lufthansa:

Millions angry about the ticket refund situation

Still can’t get a refund for the cancelled flight? Lufthansa – like other airlines – was slow to act. Now the consumer advice center filed a complaint with the Cologne Regional Court. At the main hearing scheduled for December, it has been decided that Lufthansa offers refunds instead of rebooking or vouchers. Ticket refunds are not only required by European law, but are also important to avoid losing the trust of customers.

Which passengers could this be in the future?

A change in strategy away from business travellers?

The continuous growth of the past few years came to an abrupt end for aviation players. Industry experts have been predicting for some time now what long-term effects the pandemic will have on customers. Will video conferencing still be used instead of business travel?

Lufthansa’s Covid-19 countermeasures include corona rapid tests as a possible condition for passengers. The Austrian subsidiary Austrian Airlines has been testing such tests since October. Since November 12, the first pre-flight test runs for rapid antigen tests have also been introduced on a trial basis on the Munich-Hamburg route.

Successful testing of entire flights can be the key to reviving international air traffic.

Lufthansa Board Member Christina Foerster

Reduction of the Lufthansa fleet – radical cost reduction

The number of jets was further reduced in the winter timetable, which is valid until April 2021. Across all Group airlines, Lufthansa is again grounding 125 aircraft that were scheduled to take off in winter in the current final quarter. The giant Airbus A380s, the former flagships, are being retired.

The workforce is also having to bow to the pressure to cut costs and is having to make tough cuts to get back on track:

Savings pressure, job cuts, and savings potential – the situation is serious

Approximately 22,000 full-time positions have already been declared a “personnel surplus” at Lufthansa and up to 30,000 employees are now fearing for their jobs. The faltering negotiations with the unions – to secure jobs by reducing working hours and forgoing income – remained fruitless for a long time. The associations Cockpit, Verdi and the cabin union Ufo are taking a hard line with Lufthansa; for a long time there were only fragmentary agreements.

A preliminary agreement has now been reached with Verdi: there will be no redundancies for ground staff in 2021, but ground workers will have to forgo part of their pay.

After massive pressure, the pilots’ union Cockpit has also bowed to the pressure to save money: a waiver offer limited until the end of the year could be extended until June 30, 2022. For Lufthansa pilots, this means that they would have to forgo a large part of their salary.

Savings potentials of several hundred million euros for the Group are exhausted in the worst crisis in its history.

 A new label, which – as the Lufthansa Group explicitly points out – started before the Corona crisis, has also been criticized by employees:

Lufthansa project “Ocean”: competitive in tourism

In order to position itself in the market for vacation flights, Lufthansa is planning to reorganize its long-haul tourist traffic and establish a new brand. Flights to attractive destinations are to be offered on the platform “Ocean“, but without a collective bargaining basis. The united head wind of the trade unions to the non-tariff conditions, and culminated in a storm run in the form of a public letter of the trade unions and employee representatives to Berlin.

An outlook from the loss zone and the bright spot vaccine

How many bitter Covid-19 pills are still to be swallowed, when can black figures be written again? In the third quarter, Lufthansa’s loss totalled around 1.3 billion euros. What will the fourth quarter show?

We are at the beginning of a winter that will be hard and challenging for our industry. (…) Our aim remains to stay the number one airline group in Europe even after the crisis is over.

Lufthansa CEO Carsten Spohr

By spring at the latest, the distribution of anti-corona vaccines will also be a matter of discussion. Lufthansa Cargo and its subsidiary Swiss are world leaders in the temperature-controlled transport of medicines.

by Reiner Hertl

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