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Lufthansa sees no bright horizons in the near-term future of aviation—and is increasingly looking to cuts as a result.
The German aviation giant said Thursday that it lost €1.7 billion (around $2 billion) last quarter, despite a whopping 59% reduction in operational expenditure that it achieved by furloughing workers on government-supported pay and by cutting unnecessary expenses.
“These measures were only partially able to compensate for the decline in sales,” it said in a statement. And, with Lufthansa now predicting that the aviation slump will last into 2024, it intends to move forward with compulsory redundancies in Germany—something it says it was hoping not to do.
“The Group’s objective was to avoid redundancies as far as possible,” it said. “Against the background of the market developments in global air traffic and based on the course of the negotiations on necessary agreements with the collective bargaining partners, this goal is no longer realistically within reach for Germany either.”
Because of ongoing negotiations with various unions, it is not yet possible to say how many of Lufthansa’s planned 22,000 job cuts will take place in Germany.
A company spokesperson told Fortune Thursday that it has reached an agreement with the cabin crew staffers’ union, which the union’s members still need to approve before it can take effect. Talks with pilot and ground-staff unions are still underway.
“The negotiations will definitely continue,” Mira Neumaier, a negotiator for the Verdi union, which represents ground staff, told Fortune, adding that the union and Lufthansa will be meeting again Friday.
Verdi argues that Lufthansa’s German workers expect protection from redundancies, particularly as the airline is the beneficiary of a €9 billion bailout by the German state. It also claims Lufthansa has been stalling the talks on the issue of pay cuts, which the union says will hit lowest-paid workers the hardest.
“There has to be a fair conversation,” Neumaier said.
Lufthansa’s spokesperson disagreed, saying: “We need measures from all of our groups. We saw it’s possible with the cabin staff.”
Europe’s commercial airline sector has been hit particularly hard by the coronavirus outbreak as holiday and business travel ground nearly to a halt in March. The number of airlines to announce job cuts since then is a long one. It includes British Airways, Ryanair, and Air France, to name a few.
“No quick recovery”
Carsten Spohr, Lufthansa’s CEO, said in the carrier’s statement that “especially for long-haul routes there will be no quick recovery.”
“We were able to counteract the effects of the coronavirus pandemic in the first half of the year with strict cost management as well as with the revenues from Lufthansa Technik and Lufthansa Cargo. And we are benefiting from the first signs of recovery on tourist routes, especially with our leisure travel offers of the Eurowings and Edelweiss brands,” he said. “Nevertheless, we will not be spared a far-reaching restructuring of our business.”
Lufthansa was the first big airline to embrace a smaller-is-better stance in response to the coronavirus pandemic, announcing all the way back in early April that it would reduce its fleet size.
On Thursday, it said the fleet would see a permanent reduction of 100 planes—despite which, it still wants to offer the same capacity in 2024 that it did before the crisis hit.
“We are convinced that the entire aviation industry must adapt to a new normal,” Spohr said. “The pandemic offers our industry a unique opportunity to recalibrate: to question the status quo and, instead of striving for ‘growth at any price,’ to create value in a sustainable and responsible way.”
