Lufthansa narrows losses due to cost cuts and resumption of bookings Reuters

© Reuters. File photo: On June 25, 2020, a Lufthansa plane parked on the tarmac at Frankfurt Airport in Germany. REUTERS/Kai Pfaffenbach // File photo

Authors: Ilona Wissenbach and Tomasz Janowski

FRANKFURT (Reuters)-Deutsche Lufthansa said on Thursday that the recovery of air travel and progress in cost savings helped the airline further reduce its second-quarter losses and set a record for cash inflows for the first time since the beginning of the coronavirus crisis.

The group also owns Eurowings, Swiss Airlines, Brussels Airlines, and Austrian Airlines, and reports that its adjusted operating loss has narrowed to 952 million euros ($1.13 billion) from 1.7 billion euros a year ago, which is slightly lower 971 million euros predicted in a poll provided by the company.

Lufthansa stated that the relaxation of travel restrictions and pent-up demand contributed to a significant recovery this quarter, and cost savings, including layoffs, helped prevent the loss of cash and brought in cash inflows of 340 million euros.

CEO Carsten Spohr said in a statement: “So far, more than 30,000 colleagues have left us in the process. This fact hurts all of us, but sustainably saves more than 100,000 remaining jobs. It is inevitable.”

Lufthansa shares rose about 0.3% in early trading.

Bernstein analysts welcomed the progress made in the restructuring, but pointed out that the group’s financing plan is uncertain.

They said in a report: “The scale and timing of equity financing previously planned before the September general election has not yet been determined, and it is still the primary consideration for investors.”

Lufthansa stated that its airline carried 7 million passengers during the quarter, which is 18% of the 2019 level, although this figure has improved throughout the quarter, reaching 40% by the end of June. Revenue increased by 70% over last year, reaching 3.2 billion euros, slightly lower than analysts’ expectations.

Cautious outlook

Competitors including Air France-KLM Group and British Airways owner IAG (LON:) have also reported positive cash flows, but like IAG, Lufthansa is more cautious about its prospects than some competitors.

Although the demand for tourists is expected to be strong in the second half of the year and business travel will gradually recover, the group maintains its annual capacity target at 40% of the pre-crisis level and expects it to reach 50% in the third quarter.

EasyJet and Ryanair, two low-cost airlines on trans-Atlantic routes that are not affected by U.S. inbound travel restrictions, are expected to reach two-thirds of the capacity, while Air France-KLM believes this ratio is 60% to 60%. 70%.

In June, Lufthansa formulated a plan to return to profitability with fewer aircraft and employees than before the pandemic, and stated that it has reached half of its goal of cutting costs by 3.5 billion euros by 2024. This is six months ahead of schedule, thanks to the better-than-expected adoption of voluntary layoff plans in Germany and Switzerland.

The group stated that its freight business achieved record profits, while its service division returned to profitability during the quarter.

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