Lufthansa Rebound Delayed as Virus Continues to Grip Europe

(Bloomberg) -- Deutsche Lufthansa AG reined in capacity plans for the early summer as a surge in coronavirus cases coupled with Europe’s slow rollout of jabs pushes a hoped-for travel rebound later into the peak season.

Lufthansa now expects to offer only 40% of its pre-pandemic capacity for 2021 as a whole, according to a statement Thursday, a figure that’s below the level the German airline group has said is needed to generate positive cash flow. The operating loss for the first quarter was 1.1 billion euros ($1.3 billion).

Airlines across Europe are wrestling with an uncertain outlook as countries work toward a reopening, aided by plans to introduce so-called vaccine passports, while continuing to battle the latest surge in the pandemic. The International Air Transport Association last week forecast that the region will be the slowest worldwide to reduce losses this year.

Lufthansa Chief Executive Officer Carsten Spohr said that with travel restrictions still in place in most parts of the world, a “significant market recovery” won’t come until the second half as vaccination programs progress, with only a gradual pickup in demand expected before then.

The group’s individual carriers, which include Austrian Airlines and Swiss, will therefore ramp up flights later than previously planned to reflect the delayed lifting of curbs.

The full-year capacity estimate is at the bottom end of a previous 40% to 50% range. The group was able to offer only 21% of its 2019 seating level in the first quarter, when its airline brands flew 3 million people, 10% of the pre-crisis number.

Planemaker Airbus SE CEO Guillaume Faury said separately Thursday that the first quarter showed that “the crisis is not yet over for our industry,” adding that the market “remains uncertain.”

Lufthansa said its cash drain in the first quarter shrank to 235 million euros a month, aided by a strong cargo market. The company previously said it expected outflows to be no more than 300 million euros, the average for the fourth quarter. The figure should drop to 200 million euros this quarter.

Lufthansa, Europe’s biggest airline when operating a full schedule, reiterated that it expects a lower operating loss for the current fiscal year.

Spohr has said the carrier needs to use an “inevitable restructuring” to boost efficiencies in order to ride out the crisis, and Chief Financial Officer Remco Steenbergen said in the release that the implementation of strict cost-cutting measures “remains our highest priority.”

Lufthansa will on Tuesday ask investors to back a potential 5.5 billion-euro capital increase as a step toward removing the German state as its biggest shareholder after a 9 billion-euro bailout.

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