Lufthansa may permanently ground more jets to emerge leaner from the coronavirus pandemic, the German airline group said on Thursday, as it reported a record 6.7 billion euro ($8.10 billion) loss for 2020.
The group, which also owns Austrian Airlines and the Swiss and Eurowings brands, trimmed its 2021 capacity plans as COVID-19 disruptions drag on but held out hope for a summer upturn.
"We are examining whether all aircraft more than 25 years old will remain on the ground permanently," Chief Executive Carsten Spohr said, pledging to make 2021 "a year of dimensioning and modernization" for the company.
Lufthansa reported a 1.14 billion-euro fourth-quarter net loss with a 1.29 billion euro deficit in adjusted earnings before interest and tax (EBIT). Revenue fell 71% to 2.59 billion euros.
Its shares were down 0.4% at 12.73 euros as of 8:41 a.m. GMT in Frankfurt, after gaining nearly 15% since the start of the year on recovery hopes.
The group, which received a government-backed 9 billion euro bailout last June, said it will operate at 40%-50% of pre-crisis capacity this year, down from an earlier 40%-60% forecast.
The group's full-year net loss of 6.73 billion euros was on 13.59 billion euros in revenue, down 63%. The company predicted a narrower 2021 EBIT loss than last year's 5.45 billion euros.
Analysts had expected losses of 6.63 billion euros for 2020 and 1.24 billion euros for the last three months, according to Lufthansa's consensus polling.
The airline group has outlined plans to cut its fleet to 650 planes in 2023 and phase out aging Boeing 747-400s and Airbus 340-600s. A slower recovery means more grounded planes may never return to service before retirement.
Operating cash burn was reduced to 300 million euros per month in the fourth quarter and is expected to remain stable at that level in the first three months of 2021, the company said.
Like many airline peers, Lufthansa posted record 2020 cargo profits as mass aircraft groundings squeezed capacity and sent freight prices soaring. Divisional adjusted EBIT jumped to 772 million euros from 1 million euros, dwarfed by passenger losses.
Net debt increased to 9.9 billion euros as of Dec. 31 from 6.7 billion euros a year earlier, while total liquidity stood at 10.6 billion euros including 5.7 billion euros in unused aid.
"We have sufficient liquidity to withstand a market environment that remains difficult," said Chief Financial Officer (CFO) Remco Steenbergen.
Headwinds
Bernstein analyst Daniel Roeska said that despite "tangible progress" on cost-cutting at its airline subsidiaries, "Lufthansa mainline is still stuck at step one" with short-term crisis union agreements.
"More needs to happen – and faster," Roeska said.
Although it has put much of its staff on curtailed hours, Lufthansa cut its global workforce by 20% to 110,000 in 2020 and is seeking to eliminate another 10,000 German jobs or equivalent wage costs.
Over the last months, it has done deals with unions representing pilots and ground crew so as to head off forced redundancies until March 2022.
Pilots agreed to short-hour arrangements and corresponding salary cuts, while ground staff signed on to giving up bonuses and pay raises to save their jobs.
Lufthansa's woes mirror those of its competitors elsewhere.
Industry group International Air Transport Association (IATA), which represents 290 major airlines worldwide, warned last week that global air passenger traffic will recover more slowly than expected this year because coronavirus variants have created strong headwinds.
IATA now estimates that traffic will reach between 33% and 38% of the levels recorded in 2019.
Its previous 2021 forecast was for traffic to reach 51% of the levels seen before the coronavirus pandemic struck.