warns it may cut down further on its capacity plans for the next winter season if an emerging forward-booking weakness continues.
The airline has already revised capacity growth downwards from 5% to 4% for 2014, mainly because of the effects of a three-day pilot strike last month which continues to trim forward bookings. According to Chief Financial Officer Simone Menne, the airline does not yet see the need to adjust its financial targets for the year, which sees the airline posting a €1.3-1.5 billion operating profit.
"We have not yet managed to close the gap in the forward bookings that have appeared in the strike," Menne told analysts on Tuesday. The airline is also feeling the effects in yields and does not see them recovering for the remainder of the year. Closing the gap is "at the top of our agenda."
Talks with pilot union Vereinigung Cockpit continue. Pilots went on strike over the future of their early retirement scheme that has so far allowed them to stop flying at age 55. Lufthansa terminated that collective bargaining agreement at the end of last year and wants its pilots to fly significantly longer and cut back on early retirement benefits over time. "Constructive talks" are continuing, Menne says. The two sides have scheduled meetings until around mid-May, but so far no breakthrough is in sight.
The pilot strike is one significant factor for the weakening outlook, but it is not the only one.
"March was disappointing for all airlines in the group," Menne says. The group includes Lufthansa,, Austrian, Swiss and , and only Lufthansa and Germanwings pilots went on strike last month. Menne points out that, unlike in prior years, the group was unable to keep up passenger load factors. There were some exceptions such as Asia Pacific and Africa where Lufthansa used smaller aircraft. But there was significant weakness on the North Atlantic where several carriers increased capacity and in the intra-European connecting market that affected its hubs in Frankfurt and Munich, while the direct services unit Germanwings did not experience the issues to the same extent.
Germanwings has taken over the important Dusseldorf base in March from Lufthansa. As part of the SCORE program, all flights except that hub feeding in Munich and Frankfurt are being moved to Germanwings. The Dusseldorf operation consists of 27 aircraft and 26 destinations. Germanwings expects to carry around 5 million passengers from and to Dusseldorf in 2014.
Menne says the airline plans to convert a single-digit number ofinto a high-density configuration with no first class and only 18 business class seats. The aircraft would likely be used on existing routes to South-East Asia and possibly new routes in the region. A firm decision is outstanding. The plan is seen as a one reaction to increasing competition from Gulf carriers that has made some of Lufthansa’s services in the region unprofitable.
Lufthansa does not have plans to take over the majority in its Belgian affiliate Brussels Airlines. It owns 49% now and has a call option for the remaining stake until 2017.
In the first quarter, Lufthansa posted an operating loss of €245 million, compared to €359 million a year earlier. A lot of the improvement has been driven by Lufthansa’s changed depreciation policy for the aircraft fleet: the airline is now writing off its fleet over 20 years to 5% - compared to twelve years and 15% so far. The airline’s results were also helped by lower unit costs (-6.1%) caused mainly by a weaker dollar. Revenues per available seat mile (RASM) were down by 3.9%.