Lufthansa Set To Slow Down Airbus Deliveries

Lufthansa received its much-needed bailout in the nick of time last month. This led to conditions for the group not to take delivery of more than 80 new aircraft until 2023. However, it seems quick debt repayment could be more of a priority than fleet renewal, slowing down the carrier’s significant Airbus order delivery rate even further.

Lufthansa, Ryanair, Irresponsible Low Fares
Lufthansa may prioritize quick debt repayment over new aircraft for awhile. Photo: Getty Images

Rescue equals debt

After many twists and turns, late last month, Lufthansa’s €9 billion ($10.3 billion) bailout package was passed with resounding approval by the group’s Board. The much-awaited rescue deal saved Lufthansa from having to file for bankruptcy protection. However, it also created a burden of heavy debt which the airline and its subsidiaries will have to carry for years to come.

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The terms of the bailout allow Lufthansa to take delivery of no more than 80 new planes through 2023. Considering that the carrier had 198 aircraft on order at year-end, 156 of which were for Airbus jets, that’s already quite the blow to the European manufacturer. However, the conditions did not require the outright cancellation of any of them.

Meanwhile, Lufthansa could potentially take even less than the 80 allowed, slowing the deliveries down even further than the potential average of one every 2.4 weeks. A source familiar with the matter told Gulf News that while the plans are still in flux and dependant on how quickly demand will bounce back, it seems that the carrier will opt for swift repayments of its loans over new planes.

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Lufthansa’s debt interest rate more than doubles by 2027. Photo: Getty Images

Huge interest increase by 2027

Of course, it would be in Lufthansa’s best interest to get as much of this newly acquired debt out of the way as soon as possible. The interest rate on much of the rescue package funding more than doubles by 2027, from 4% in the first years to a whopping 9.5%. As such, it is understandable that priorities could shift away from acquiring new jets, to repaying creditors as quickly as possible.

The orders from Airbus for mostly A320neos and A350 widebodies are valued at about $23 billion at list price.

A Lufthansa spokesperson told Simple Flying that the group is in regular communication with the manufacturers in order to adapt aircraft orders to existing requirements and the latest developments.

Airbus declined to comment on what it calls “customer’s fleet strategy” or “confidential talks with individual customers.”

Air France Airbus A320
The French Government has urged Air France to remain a good customer of Airbus. Photo: Getty Images

France wants its airline to keep buying

While German bailout facilitators may not be so keen on new jets, the same can not be said for their French counterparts. The French Minister for Finance, Bruno Le Maire, requested that Air France-KLM remain “good customers” of Airbus, following a €10.4 billion ($11.9 billion) bailout from his government and the Netherlands.

Meanwhile, Germany has expressed no such request, direct or indirect, towards its flag-carrier. This even though it owns 10.9% of Airbus, nearly equalling the French 11%.

Furthermore, France has set aside an additional €8 billion ($9.15 billion) to safeguard jobs in its aerospace industry. The deal will protect against decline, redundancies, and to keep Airbus from losing ground in competing against Boeing and Chinese COMAC.