Lufthansa posts record €6.7bn loss amid Covid hit to air travel

German airline says it is dependent on a vaccine rollout to get people flying again as the pandemic continues to impact air travel

Aircrafts of German airline Lufthansa that at the airport in Frankfurt am Main, western Germany.  Lufthansa said on Thursday that it it lost a record €6.7 billion last year. Photograph: ARNE DEDERT/POOL/AFP via Getty Images

Aircrafts of German airline Lufthansa that at the airport in Frankfurt am Main, western Germany. Lufthansa said on Thursday that it it lost a record €6.7 billion last year. Photograph: ARNE DEDERT/POOL/AFP via Getty Images

 

German airline Lufthansa posted a record €6.7 billion annual loss and said it is dependent on a successful vaccine rollout to get people flying again as the coronavirus crisis continues to roil air travel.

Europe’s biggest airline group said Thursday it will struggle to make money on flights before the end of this year as it dials back capacity plans. Chief executive 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,” Spohr said in a statement. “Internationally recognised, digital vaccination and test certificates must take the place of travel bans and quarantine.”

Network carriers like Lufthansa have seen the long-haul markets on which they depend almost wiped out by the pandemic. Spohr warned that his airline may be able to operate only 90 per cent of its pre-pandemic capacity even by mid-decade, after previously suggesting the market would recover fully by 2024.

Reduced capacity

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.

The airline now expects to deploy between 40 per cent and 50 per cent of its 2019 capacity levels this year, compared with a previous target of 40 per cent to 60 per cent. 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 and EasyJet may reap a earlier rebound, especially if a faster vaccination rollout in the UK allows Britons to make a more rapid return to Mediterranean beaches.

The EU 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 per cent 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, handing it a 20 per cent stake in the company.

The 2020 loss was worse than the €6.24 billion estimated by analysts, while full-year revenues dropped 63 per cent to €13.5 billion.

- Bloomberg