Deutsche Lufthansa AG on Thursday posted a record 6.7 billion-euro ($8.1 billion) annual loss and said it will take longer than previously anticipated to achieve a full recovery from the coronavirus crisis.
Struggling to Make Money: Lufthansa
Europe’s biggest airline group was in a Bloomberg report quoted as saying it will struggle to make money on flights before the end of this year as it dials back capacity plans. Chief Executive Officer Carsten Spohr said there could still be a revival this summer, but only if the pace of jabs allows international curbs to be eased.
“We expect demand to pick up again as soon as restrictive travel limits are reduced by a further roll-out of tests and vaccines,” Mr. Spohr said in a statement. “Internationally recognized, digital vaccination and test certificates must take the place of travel bans and quarantine,” a report in The Hindustan Times said.
Network carriers like Lufthansa have seen the long-haul markets on which they depend almost wiped out by the pandemic. Mr. Spohr warned that his airline may be able to operate only 90% of its pre-pandemic capacity even by mid-decade, indicating his deteriorating confidence in a revival after the company previously suggested the market could recover fully by 2024.
Lufthansa shares fell as much as 3.2% and traded 2.1% lower at 12.52 euros as of 9:23 a.m. in Frankfurt, paring gains this year to 16% after the stock lost a third of its value in 2020.
Lufthansa’s reassessment of the hoped-for rebound comes with travel still largely locked down and the European Union struggling to accelerate Covid-19 vaccine rollouts after a sluggish start.
It echoes recently articulated concerns spanning the International Air Transport Association, which said last month airlines could burn through $95 billion this year, almost double the previous forecast, to plane maker Airbus SE, which unexpectedly forecast jet handovers will remain at 2020’s depressed levels.
Lufthansa now expects to deploy between 40% and 50% of its 2019 capacity levels this year, compared with a previous target of 40% to 60%. That’s bad news for profitability, given that it needs to operate with around half of available capacity to stem cash outflows.
Short-haul leisure specialists such as Ryanair Holdings Plc and EasyJet Plc may reap a earlier rebound, especially if a faster vaccination rollout in the U.K. allows Britons to make a more rapid return to Mediterranean beaches.
The European Union is also three or four months away from issuing coronavirus immunity certificates, raising the prospect of another lost tourism season for the bloc’s aviation and hospitality industries, according to a briefing note circulated to national delegations in Brussels on Tuesday.
Lufthansa said it will be able to rush back as much 70% of capacity in short order if demand in its markets picks. The carrier is also expanding its low-cost long-haul business to be ready for a revival in tourism even as corporate travel remains constrained.
A delayed recovery raises the prospect of the German state retaining a major holding in Lufthansa for longer if it renders the carrier less able to repay borrowings. Lufthansa has tapped the government for 9 billion euros, handing it a 20% stake in the company.
Lufthansa cut capital spending by two-thirds in 2020 and said the outlay on aircraft will shrink in future years as it cuts the fleet to 650 planes by 2023 from more than 750 at the end of last year. The airline is mulling whether to permanently remove all models more than 25 years old from service.
The 2020 loss was worse than the 6.24 billion euros estimated by analysts, while full-year revenues dropped 63% to 13.5 billion euros.