According to Lufthansa’s latest earnings figures, the German flag carrier is currently losing €235 million ($285 million) each month. The airline continues to feel the impact of the COVID-19 pandemic, which is hitting European airlines particularly hard at the moment compared to other regions of the world, such as the US and China.
We’re currently seeing a wave of financial results from across the aviation industry as numbers from the first quarter are connected. Earlier today, Airbus reported that it had swung to a profit amid a flurry of deliveries. Meanwhile, Boeing, yesterday revealed a $500 million loss for the quarter. Now Lufthansa has also announced its Q1 results.
Revenue drop 60%
According to Lufthansa’s CEO, The Lufthansa Group’s revenue dropped by 60% in Q1 of 2021. However, the group’s adjusted EBIT of €1.1 billion ($1.3 billion) is actually a 6% improvement from 2020. This is particularly impressive when you consider that the airline was hit particularly badly by the second and third waves of COVID-19 in Europe this year. In contrast, January and February last year were reasonably standard months.
Spohr put this down to the cost-saving measures achieved by the German flag carrier in the past year. However, he also revealed that he expects to see better numbers in Q2. The airline expects monthly cash burn to drop to €200 million ($242 million) a month this quarter.
Will things improve?
Fortunately for Lufthansa, it sees positivity in the future. With the roll-out of vaccinations, the airline plans to operate around 40% of its pre-crisis capacity this year. However, the airline is ready to ramp capacity up to 70% in the absolute best-case scenario.
Of course, the airline’s total capacity available has dropped due to 20% of the fleet being retired. However, Sphor believes the total possible capacity will only drop by a maximum of 10% due to more efficient aircraft schedules.
Moving further forward, Lufthansa expects to operate around 70% of its pre-crisis capacity in 2023, followed by 80% in 2024 and 90% in 2025. The industry’s recovery is expected to be driven by “visiting friends and relatives” (VFR) traffic, closely followed by leisure travel. Both demographics are expected to have recovered fully by 2024.
However, many airline CEOs have been pessimistic about the future of business travel, given the rise of Zoom, Teams, and other similar platforms. Spohr does not share this pessimism. He and the Lufthansa Group believe that business demand will return to 90% of pre-crisis levels by 2025. Spohr thinks that small and medium-sized businesses will lead the charge. Large corporate clients will be the last to resume travel, according to the Lufthansa CEO. This is because they have the most restrictive COVID-19 related travel policies at present.
Will the German aviation industry recover as Spohr suspects? Let us know what you think and why in the comments below!