Lufthansa CEO Warns Of Permanent Change

Lufthansa Group plans to make massive cuts to its over €3 billion ($3.4 billion) in planned investments this year, as the airline prepares for an extended period of no or very little demand.
Credit: Rob Finlayson

Lufthansa Technik could provide “attractive” collateral for its parent airline group to raise financing to ensure its survival through the novel coronavirus crisis, Credit Suisse has said.

The investment bank values the MRO business at between €4 billion ($4.2 billion) and €5 billion. It also recommended that the airline use its high proportion of owned aircraft to raise money through sale and leaseback deals, although Lufthansa has said that it would rather use the aircraft to help secure bank loans.

Lufthansa group chief executive Carsten Spohr warned today that “the longer this crisis lasts, the more likely it is that the future of aviation cannot be guaranteed without state aid,” although Lufthansa intends to tap its own resources for the time being.

However, in one of the first high-level acknowledgements that there will be no return to business as usual, Spohr warned that Lufthansa would have to emerge from the crisis as a different animal. “After the crisis the Lufthansa group will not return to the previous normal circumstances and fly on as usual…We must rethink the entire business.”

There is growing evidence that Spohr is correct, and also that predictions of a ‘V’-shaped recovery for air traffic are mistaken. Many of those predictions assumed three to six months of disruption, but that is looking increasingly like an underestimate.

For a start, even if individual countries bring infection rates under control, fears of further outbreaks will see continued restrictions on flights from other parts of the world.

Second, without a globally coordinated and ruthless Wuhan-style imposition of mass quarantine, it is difficult to see how the COVID-19 illness will recede as a significant threat to healthcare systems until a vaccine is developed. This could take up to 18 months--far longer than governments can prop up airlines.

Even a year would probably be too much, so it is arguable that whatever aviation industry is still standing after the crisis will be a shadow of its former self.

Third, even once there is a novel coronavirus vaccine, the merest hint of another novel virus--something that has occurred roughly once every two years since the first SARS crisis--will see air travel blockades re-erected, albeit for short periods. Excess caution in this respect is an inevitability.

Alex Derber

Alex Derber, a UK-based aviation journalist, is editor of the Engine Yearbook and a contributor to Aviation Week and Inside MRO.