Lufthansa sees delay in breaking even after record $10.8 billion loss

FRANKFURT (BLOOMBERG) – Deutsche Lufthansa posted a record €6.7 billion (S$10.8 billion) annual loss and said it will struggle to make money on flights before the end of this year as the coronavirus crisis continues to roil air travel.

Europe’s biggest airline group will dial back capacity plans for 2021 to a level at which it is unlikely to make money, according to a statement on Thursday (March 4), while forecasting a lower operating loss for the year.

Network carriers like Lufthansa have seen the long-haul markets on which they depend almost wiped out by the pandemic, with the International Air Transport Association warning that some services may take years to recover.

The German company said demand should begin to pick up on some routes this summer, though only if vaccine roll-outs permit an easing of curbs.

“Internationally recognised digital vaccination and test certificates must take the place of travel bans and quarantine,” chief executive Carsten Spohr said in a statement. “From the summer onwards, we expect demand to pick up again as soon as restrictive travel limits are reduced by a further roll-out of tests and vaccines.”

Lufthansa 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 is bad news for profitability, given that the airline needs to operate with around half of its available capacity to stem cash outflows – leading to the reappraisal of when it might break even.

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.