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Lufthansa Group Reports Second Quarter Loss of €1.7 Billion on 80 Percent Revenue Decline to €1.9 B

The Lufthansa Group reported on Thursday a second quarter EBIT loss of €1.7 billion compared to earnings of €754 million during the same quarter last year. Revenue for the quarter declined 80 percent to €1.9 billion versus €9.6 billion.

Lufthansa Group Reports Second Quarter 2020 Financial Results - Courtesy Lufthansa

On Thursday (August 6, 2020) Lufthansa Group reported their second quarter 2020 financial results with an EBIT (earnings before interest and taxes) loss of €1.7 billion compared to earnings of €754 million during Q2 2020. The Group’s revenue declined 80 percent to €1.9 billion compared to €9.6 billion during the same period last year, attributable to the global COVID-19 pandemic. Most of the Group’s quarterly revenue (€1.5 billion) was generated by Lufthansa Cargo and Lufthansa Technik. During the quarter, the Group reduced operating expenses by 59 percent through the introduction of short-time working and cancellation of non-essential expenditures. The consolidated net loss for the quarter totaled €1.5 billion compared to a net profit of €226 million during Q2 2019. In Thursday’s announcement, Deutsche Lufthansa AG’s Chairman of the Executive Board and CEO, Carsten Spohr said,

“We are experiencing a caesura in global air traffic. We do not expect demand to return to pre-crisis levels before 2024. Especially for long-haul routes there will be no quick recovery. We were able to counteract the effects of the coronavirus pandemic in the first half of the year with strict cost management as well as the revenues from Lufthansa Technik and Lufthansa Cargo. And we are benefiting from the first signs of recovery on tourist routes, especially with our leisure offers of the Eurowings and Edelweiss brands. Nevertheless, we will not be spared a far-reaching restructuring of our business. We are convinced that the entire aviation industry must adapt to a new normal. The pandemic offers our industry a unique opportunity to recalibrate: to question the status quo and, instead of striving for “growth at any price”, to create value in a sustainable and responsible way.”

The Lufthansa Group carried 1.7 million passengers during the quarter, 96 percent fewer than the same period last year, on a capacity decline of 95 percent. The Group’s seat load factor fell 27 percent year-over-year to 56 percent during the quarter, while freight capacity fell 54 percent due to lack of capacity on passenger aircraft. The company's freight kilometers sold was down 47 percent on a 10 percent increase in cargo load factor to 71 percent.

For the first half of the year (H1), CAPEX fell to €897 million compared to €1.9 billion during H1 2019, largely attributable to a delay in aircraft deliveries. Second quarter CAPEX declined to only €127 million on strict working capital management and liquidity preservation measures, while net debt increased 10 percent versus Q4 2019 to €7.3 billion. As of June 30, 2020, centrally available liquidity totaled €2.8 billion a decrease of €1.4 billion compared to the end of the first quarter. The second quarter liquidity figures do not yet include funds from the Economic Stabilization Fund of the Federal Republic of Germany, which will bolster the Group’s liquidity position to €11.8 billion.

Looking forward, the Group does not expect demand to return to pre-pandemic levels until 2024 at the earliest and has therefore implemented a comprehensive restructuring plan called “Renew” across all divisions and subsidiaries. The program included 22,000 full-time job redundancies (including 1,000 administration jobs at Deutsche Lufthansa AG) and a fleet reduction of at least 100 aircraft. The Group’s current financial plan projects that positive cash flows will once again be generated during 2021. As of June 30, 2020, the Group had 129,400 employees, a year-over-year headcount reduction of 8,300.

During July, the Group increased its offer to approximately 20 percent of last year’s levels, with load factors of around 70 percent on European short-haul routes. For Q3, the Group plans to increase capacity to around 40 percent of 2019 levels on short and medium-haul routes and approximately 20 percent on long-haul routes. In the fourth quarter, the Group plans on increasing short and medium-haul capacity to around 55 percent versus last year, while long-haul capacity will be bolstered to around 55 percent. Therefore, in terms of destinations on offer, the Lufthansa Group will have restored 95 percent of short and medium-haul and 70 percent of international destinations by the end of 2020. However, even with the gradual capacity expansion, the Group expects a negative Q4 and full-year Adjusted EBIT.

Source: Deutsche Lufthansa AG

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