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 significant value reductions

  • Modified EBIT declines to minus one.seven billion euros in the 2nd quarter despite significant value reductions
  • Thorough “ReNew” restructuring programme to make sure worldwide competitiveness right after the disaster
  • Lufthansa Cargo with potent 2nd quarter
  • Variety of workforce already lessened by eight,300 – redundancies no longer dominated out in Germany as nicely
  • Normalization of desire to pre-disaster degree predicted for 2024 at the earliest

The collapse in desire for air journey because of to the Corona pandemic led to an eighty % drop in revenue for the Lufthansa Group in the 2nd quarter to one.9 billion euros (preceding 12 months: 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 less than critique amounted to minus one.seven billion euros (preceding 12 months: 754 million euros), inspite of in depth value reductions. Working costs were lessened by 59 %, principally by means of the introduction of short-time functioning for massive areas of the workforce and the cancellation of non-essential expenditures. Nevertheless, these actions were only partially equipped to compensate for the decline in product sales. The consolidated internet earnings of Lufthansa Group for the months April to June amounted to minus one.five billion euros (preceding 12 months: 226 million euros).

The logistics division benefited from stable desire. The decline of cargo ability in passenger plane (“bellies”) led to a significant improve in yields. Lufthansa Cargo’s Modified EBIT as a result rose to 299 million euros (preceding 12 months: minus 9 million euros).

First fifty percent of 2020 
In the total initially fifty percent of 2020, Lufthansa Group revenue fell by 52 % to eight.3 billion euros (preceding 12 months: 17.four billion euros). Modified EBIT amounted to minus two.9 billion euros (preceding 12 months: 418 million euros) and EBIT to minus three.five billion euros (preceding 12 months: 417 million euros). The variation amongst the two figures is primarily because of to depreciation on plane and plane use legal rights amounting to 300 million euros, goodwill impairments totaling 157 million euros and the impairment of joint enterprise holdings in the MRO section totaling sixty two million euros.

In addition, the destructive industry value advancement of gasoline value hedging contracts had a destructive affect of 782 million euros on the fiscal end result in the initially six months of the 12 months. Compared with the initially quarter, this impact lowered by 205 million euros. The Lufthansa Group internet end result for the initially fifty percent of the 12 months as a result amounted to minus three.six billion euros (preceding 12 months: minus 116 million euros).

Traffic advancement in the 2nd quarter of 2020
In the 2nd quarter of 2020, the Lufthansa Group airways carried one.seven million passengers, 96 % fewer than in the preceding 12 months. Capability fell by 95 %. The seat load issue was 56 %, 27 proportion points beneath the preceding year’s figure. Freight ability supplied fell by 54 % because of to a deficiency of ability on passenger plane. The decline in freight kilometers bought was forty seven %. This reflects an improve in cargo load issue by 10 proportion points, to 71 %.

Traffic advancement in the initially fifty percent of 2020
In the initially six months, the Lufthansa Group airways carried a whole of 23.five million passengers, two thirds fewer than in the very same period final 12 months (minus sixty six %). Capability lowered by 61 %. The seat load issue fell by 9 proportion points to seventy two % in the period. Freight ability supplied fell by 36 % and cargo kilometres bought by 32 %. This resulted in an improve in cargo load issue by four proportion points to sixty six %.

Hard cash move and liquidity advancement
Money expenditure fell to 897 million euros (preceding 12 months: one,904 million euros) in the initially fifty percent of the 12 months, primarily because of to suspending planned plane deliveries, with only 127 million euros of capital expenditure in the 2nd quarter. The drastic reduction in capital expenditure, the Group-broad aim on securing liquidity and strict functioning capital management limited the funds outflow inspite of the significant drop in earnings. The altered totally free funds move for the initially fifty percent of the 12 months as a result amounted to minus 510 million euros (preceding 12 months: 269 million euros). Internet personal debt amplified by 10 % as opposed with the finish of 2019, to seven.three billion euros.

Centrally out there liquidity amounted to two.eight billion euros on June 30, a decrease of one.four billion euros as opposed with the finish of the initially quarter (31 March 2020: four.two billion euros).

The resources agreed with the Financial Stabilization Fund of the Federal Republic of Germany (WSF) to stabilize Lufthansa Group are not nonetheless incorporated in the liquidity figures as of 30 June 2020. Like these resources amounting to 9 billion euros, the Group had a whole of eleven.eight billion euros in liquidity out there as of 30 June 2020.

Since the starting of July, the Group has obtained two.three billion euros from the stabilization bundle. As a end result of the capital improve, with which the WSF has obtained a twenty % stake in the company’s share capital, the Lufthansa Group obtained funds of about 300 million euros. The release of the initially instalment of the KfW (Kreditanstalt für Wiederaufbau) bank loan contributed one billion euros, and the institution of the WSF’s Silent Participation II offered a additional one billion euros.

Hard cash outflows given that the stability sheet date connected principally to the payment of refund promises for cancelled flights. In July, the Group paid out out just less than one billion euros. In whole, the Group has so significantly reimbursed about two billion euros to buyers in the present-day 12 months 2020.

Lufthansa Group decides on “ReNew” restructuring system
The Group at present expects desire for air journey to return to pre-disaster ranges in 2024 at the earliest. Lufthansa Group has for that reason resolved on a comprehensive restructuring programme entitled “ReNew”, which also incorporates the restructuring system already underway at the airways and services businesses.

The intention remains to manage the worldwide competitiveness and potential viability of the Lufthansa Group. The system incorporates the reduction of 22,000 entire-time work opportunities in the Lufthansa Group. The Group’s fleet is to be forever lessened by at the very least a hundred plane. However, the ability supplied in 2024 is to correspond to that of 2019. To this finish, efficiency is intended to be amplified by 15 % by 2023, amid other things by lowering the range of the flight operations (AOCs) to a optimum of 10 in potential. The dimensions of the Government and Management Boards of the Group businesses will be lessened and the range of executives in the Group is intended to be decreased by twenty %. In the administration of Deutsche Lufthansa AG, one,000 work opportunities will be cut. The sum of these actions really should make it feasible to refinance the resources of the stabilization bundle as swiftly as feasible. The fiscal scheduling of Lufthansa Group stipulates that positive funds flows will be created once more in the class of 2021. Lufthansa Group at present (as of 30 June 2020) has 129,400 workforce, about eight,300 fewer than at the very same time final 12 months. The Group’s objective was to keep away from redundancies as significantly as feasible. Towards the history of the industry developments in worldwide air site visitors and dependent on the class of the negotiations on important agreements with the collective bargaining partners, this aim is no longer realistically within attain for Germany possibly.

Carsten Spohr, Chairman of the Government Board and CEO of Deutsche Lufthansa AG, said: “We are experiencing a caesura in worldwide air site visitors. We do not expect desire to return to pre-disaster ranges prior to 2024. Specifically for lengthy-haul routes there will be no quick restoration.

We were equipped to counteract the results of the coronavirus pandemic in the initially fifty percent of the 12 months with strict value management as nicely as with the revenues from Lufthansa Technik and Lufthansa Cargo. And we are benefitting from the initially symptoms of restoration on tourist routes, specially with our leisure journey delivers of the Eurowings and Edelweiss brand names. However, we will not be spared a significantly-reaching restructuring of our business.

We are confident that the total aviation marketplace ought to adapt to a new typical. The pandemic delivers our marketplace a exceptional prospect to recalibrate: to query the position quo and, as a substitute of striving for ”growth at any rate”, to develop value in a sustainable and responsible way.”

Outlook
Since the starting of July, the Group has additional expanded its flight system. This principally fears short-haul leisure journey. Lufthansa Group had already designed the expansion of its industry position in this section a focal place of its system prior to the Corona disaster. The airways Eurowings and Edelweiss engage in an vital role in this context.

In July, the Group gradually amplified its featuring to about twenty % of the preceding year’s degree, with load things of more than 70 % in European short-haul site visitors.

In the 3rd quarter, ability supplied is planned to improve to an normal of about 40 % of the prior 12 months ability on short- and medium-haul routes and to about twenty % on lengthy-haul routes. In the fourth quarter, ability is planned to additional improve to an normal of about fifty five % (short- and medium-haul) and about fifty % (lengthy-haul). With this, the Group options to return to 95 % of the short- and medium-haul and 70 % of the lengthy-haul places by the finish of the 12 months. Many thanks to a high diploma of overall flexibility in provide and ability scheduling, this figure can also vary at short recognize.

In spite of the ability expansion, the Lufthansa Group also expects a plainly destructive Modified EBIT in the 2nd fifty percent of 2020 and as a result a additional significant decline in Modified EBIT for the entire 12 months. This reflects the expectation that vital lengthy-haul routes will continue on to be served only to a very limited extent because of to ongoing journey restrictions.

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