19/09/2020

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Consequences of Corona pandemic have a considerable impact on Lufthansa result

Modified EBIT declines to minus one.seven billion euros in the 2nd quarter despite sizeable cost reductions...

  • Modified EBIT declines to minus one.seven billion euros in the 2nd quarter despite sizeable cost reductions
  • Detailed “ReNew” restructuring programme to ensure international competitiveness right after the disaster
  • Lufthansa Cargo with sturdy 2nd quarter
  • Amount of workers previously reduced by 8,300 – redundancies no lengthier ruled out in Germany as very well
  • Normalization of desire to pre-disaster degree envisioned for 2024 at the earliest

The collapse in desire for air travel thanks to the Corona pandemic led to an eighty percent fall in revenue for the Lufthansa Group in the 2nd quarter to one.9 billion euros (previous year: 9.six billion euros). Most of the revenue (one.five billion euros) was created by Lufthansa Cargo and Lufthansa Technik.

The Lufthansa Group Modified EBIT in the quarter below review amounted to minus one.seven billion euros (previous year: 754 million euros), inspite of in depth cost reductions. Operating expenses ended up reduced by fifty nine percent, mainly by way of the introduction of small-time doing the job for large pieces of the workforce and the cancellation of non-crucial expenditures. Nevertheless, these measures ended up only partly equipped to compensate for the decline in revenue. The consolidated internet cash flow of Lufthansa Group for the months April to June amounted to minus one.five billion euros (previous year: 226 million euros).

The logistics division benefited from stable desire. The reduction of cargo potential in passenger plane (“bellies”) led to a sizeable maximize in yields. Lufthansa Cargo’s Modified EBIT consequently rose to 299 million euros (previous year: minus 9 million euros).

Very first half of 2020 
In the entire initially half of 2020, Lufthansa Group revenue fell by fifty two percent to 8.3 billion euros (previous year: seventeen.4 billion euros). Modified EBIT amounted to minus two.9 billion euros (previous year: 418 million euros) and EBIT to minus three.five billion euros (previous year: 417 million euros). The big difference between the two figures is largely thanks to depreciation on plane and plane utilization rights amounting to 300 million euros, goodwill impairments totaling 157 million euros and the impairment of joint enterprise holdings in the MRO section totaling 62 million euros.

In addition, the negative industry benefit enhancement of gas cost hedging contracts had a negative effects of 782 million euros on the monetary result in the initially six months of the year. In comparison with the initially quarter, this effect lessened by 205 million euros. The Lufthansa Group internet result for the initially half of the year consequently amounted to minus three.six billion euros (previous year: minus 116 million euros).

Targeted traffic enhancement in the 2nd quarter of 2020
In the 2nd quarter of 2020, the Lufthansa Group airways carried one.seven million passengers, ninety six percent much less than in the previous year. Capability fell by ninety five percent. The seat load issue was fifty six percent, 27 percentage details under the previous year’s determine. Freight potential available fell by 54 percent thanks to a lack of potential on passenger plane. The decline in freight kilometers sold was forty seven percent. This displays an maximize in cargo load issue by ten percentage details, to 71 percent.

Targeted traffic enhancement in the initially half of 2020
In the initially six months, the Lufthansa Group airways carried a overall of 23.five million passengers, two thirds much less than in the very same period of time final year (minus 66 percent). Capability lessened by 61 percent. The seat load issue fell by 9 percentage details to seventy two percent in the period of time. Freight potential available fell by 36 percent and cargo kilometres sold by 32 percent. This resulted in an maximize in cargo load issue by 4 percentage details to 66 percent.

Dollars circulation and liquidity enhancement
Capital expenditure fell to 897 million euros (previous year: one,904 million euros) in the initially half of the year, largely thanks to postponing prepared plane deliveries, with only 127 million euros of money expenditure in the 2nd quarter. The drastic reduction in money expenditure, the Group-extensive emphasis on securing liquidity and rigorous doing the job money management restricted the cash outflow inspite of the sizeable fall in earnings. The altered totally free cash circulation for the initially half of the year consequently amounted to minus 510 million euros (previous year: 269 million euros). Net debt greater by ten percent in comparison with the stop of 2019, to seven.three billion euros.

Centrally out there liquidity amounted to two.8 billion euros on June 30, a decrease of one.4 billion euros in comparison with the stop of the initially quarter (31 March 2020: 4.two billion euros).

The money agreed with the Economic Stabilization Fund of the Federal Republic of Germany (WSF) to stabilize Lufthansa Group are not nevertheless incorporated in the liquidity figures as of 30 June 2020. Such as these money amounting to 9 billion euros, the Group had a overall of 11.8 billion euros in liquidity out there as of 30 June 2020.

Due to the fact the beginning of July, the Group has received two.three billion euros from the stabilization package. As a result of the money maximize, with which the WSF has acquired a 20 percent stake in the company’s share money, the Lufthansa Group received cash of close to 300 million euros. The launch of the initially instalment of the KfW (Kreditanstalt für Wiederaufbau) personal loan contributed a person billion euros, and the institution of the WSF’s Silent Participation II offered a further more a person billion euros.

Dollars outflows because the equilibrium sheet day similar mainly to the payment of refund statements for cancelled flights. In July, the Group paid out just below a person billion euros. In overall, the Group has so significantly reimbursed close to two billion euros to prospects in the existing year 2020.

Lufthansa Group decides on “ReNew” restructuring method
The Group presently expects desire for air travel to return to pre-disaster levels in 2024 at the earliest. Lufthansa Group has therefore determined on a in depth restructuring programme entitled “ReNew”, which also incorporates the restructuring method previously underway at the airways and company organizations.

The purpose continues to be to sustain the international competitiveness and long term viability of the Lufthansa Group. The method incorporates the reduction of 22,000 complete-time positions in the Lufthansa Group. The Group’s fleet is to be completely reduced by at least 100 plane. Nevertheless, the potential available in 2024 is to correspond to that of 2019. To this stop, productivity is supposed to be greater by 15 percent by 2023, amid other things by cutting down the number of the flight functions (AOCs) to a maximum of 10 in long term. The size of the Govt and Management Boards of the Group organizations will be reduced and the number of executives in the Group is supposed to be reduced by 20 percent. In the administration of Deutsche Lufthansa AG, one,000 positions will be slash. The sum of these measures ought to make it achievable to refinance the money of the stabilization package as immediately as achievable. The monetary preparing of Lufthansa Group stipulates that favourable cash flows will be created once more in the class of 2021. Lufthansa Group presently (as of 30 June 2020) has 129,400 workers, about 8,300 much less than at the very same time final year. The Group’s goal was to keep away from redundancies as significantly as achievable. From the track record of the industry developments in international air traffic and based on the class of the negotiations on vital agreements with the collective bargaining partners, this purpose is no lengthier realistically inside achieve for Germany either.

Carsten Spohr, Chairman of the Govt Board and CEO of Deutsche Lufthansa AG, stated: “We are experiencing a caesura in international air traffic. We do not be expecting desire to return to pre-disaster levels ahead of 2024. Particularly for lengthy-haul routes there will be no speedy recovery.

We ended up equipped to counteract the consequences of the coronavirus pandemic in the initially half of the year with rigorous cost management as very well as with the revenues from Lufthansa Technik and Lufthansa Cargo. And we are benefitting from the initially signals of recovery on vacationer routes, specially with our leisure travel features of the Eurowings and Edelweiss manufacturers. Nevertheless, we will not be spared a significantly-reaching restructuring of our business enterprise.

We are convinced that the entire aviation industry have to adapt to a new usual. The pandemic features our industry a distinctive option to recalibrate: to question the standing quo and, rather of striving for ”growth at any selling price”, to produce benefit in a sustainable and responsible way.”

Outlook
Due to the fact the beginning of July, the Group has further more expanded its flight method. This mainly problems small-haul leisure travel. Lufthansa Group had previously created the enlargement of its industry place in this section a focal place of its approach ahead of the Corona disaster. The airways Eurowings and Edelweiss participate in an crucial role in this context.

In July, the Group little by little greater its offering to close to 20 percent of the previous year’s degree, with load variables of above 70 percent in European small-haul traffic.

In the 3rd quarter, potential available is prepared to maximize to an typical of close to forty percent of the prior year potential on small- and medium-haul routes and to close to 20 percent on lengthy-haul routes. In the fourth quarter, potential is prepared to further more maximize to an typical of close to fifty five percent (small- and medium-haul) and close to 50 percent (lengthy-haul). With this, the Group strategies to return to ninety five percent of the small- and medium-haul and 70 percent of the lengthy-haul locations by the stop of the year. Thanks to a significant diploma of flexibility in source and potential preparing, this determine can also differ at small discover.

Despite the potential enlargement, the Lufthansa Group also expects a plainly negative Modified EBIT in the 2nd half of 2020 and consequently a further more sizeable decline in Modified EBIT for the complete year. This displays the expectation that crucial lengthy-haul routes will carry on to be served only to a pretty restricted extent thanks to ongoing travel restrictions.

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