Lufthansa Expects U.S. To Reopen International Travel In September
FRANKFURT—Lufthansa Group CEO Carsten Spohr now expects the U.S. to reopen air travel for fully vaccinated international passengers by the end of September, a step that could be a key milestone in the airline’s recovery.
Spohr’s forecast came after the Biden administration said it is working on a stepped approach to allow foreign travelers back into the U.S., starting with those that are fully vaccinated against COVID-19. While Lufthansa has no further information on timing, the group is working on the assumption that it will be able to accept bookings for its U.S. flights from non-U.S. citizens or residents at the end of the third quarter. The Lufthansa CEO hopes the actual reopening could even come weeks sooner.
Lufthansa’s recovery roadmap foresees the airline offering 50% of pre-crisis capacity in the ongoing third quarter, 60% in the fourth quarter and 70% in 2022. CFO Remco Steenbergen indicated the airline is targeting return to an operating profit in 2022 and positive cash-flow, a milestone that the airline already achieved in the second quarter. In the first half of 2021, the group reached €5.7 billion ($6.8 billion) in revenues, a decline of 30% over 2020, a year in which the first three months were largely unaffected by the COVID-19 crisis. It posted a €1.8 billion net loss for the first half of 2021. The second quarter, in which the airline posted a €756 million net loss, still was deeply affected by the pandemic. Lufthansa offered only 29% of pre-crisis capacity and reached 18% of traffic, measured in revenue passenger miles. Its load factor was 51%.
However, the airline saw a steep rise in bookings and traffic toward the end of the quarter. In the week of July 26, Lufthansa flew 51% of pre-crisis movements and 46% of the passenger volume. Some 84% of its destinations were back with 534 active aircraft being utilized.
Spohr shed more light on the airline’s medium-term fleet plans. He confirmed that the Airbus A380 will “not come back,” leaving British Airways as the only European carrier to continue flying the aircraft. Lufthansa has, however, decided to bring back some of its A340-600s for two years, mainly to cover planned summer 2022 capacity. The aircraft are expected to be retired upon the arrival of more A350-900s in 2023.
Lufthansa Cargo now plans to retire its remaining MD-11Fs in October; the unit has ordered one additional Boeing 777F. A340-300s will be operated until around the middle of the decade while subsidiary Austrian Airlines is to retire its 777s and 767s over the coming years. How they will be replaced has not been decided, but Lufthansa can allocate aircraft from its A350 and 787-9 orders.
The group plans to take delivery of 175 new aircraft between now and 2029 and has plans to retire another 150. Some 115 already have left. “This is a major modernization of our long-haul fleet,” Spohr said.
The airline also is making progress in its cost-cutting program. Lufthansa aims to reduce annual expenses by €3.5 billion from 2024 onward and reach an 8% operating margin. According to Spohr, 62% of the measures to reduce staff already have been implemented as well as 59% of all other measures.
Lufthansa has reduced the number of employees by over 30,000 since the pandemic began and now has a staff of 108,000. A further 5,000 are to leave between now and the end of 2023. The company is launching further voluntary leave programs for cabin crew and pilots. Spohr said he hoped around 400 pilots and more than 1,000 cabin crewmembers will take advantage, significantly reducing the risk of forced redundancies. Pilot union Vereinigung Cockpit has yet to agree to mandatory part-time work from 2022 onward until traffic has fully recovered.