Lufthansa prepares for strong growth following record annual loss

German airliner Lufthansa is preparing to bounce-back after suffering its largest-ever annual loss, seeing a slump of €6.7 billion for 2020 as the coronavirus pandemic swept across the aerospace and travel sectors.

The group is prepared to offer up 70% of its pre-crisis capacity for the upcoming summer season as it prepares for a short-term post-pandemic operations shrink.

Read more: Boeing caps off 2020 with huge quarterly loss

Company executives have warned that traffic levels may not reach pre-crisis levels until at least midway through the decade, which has mandated its transition to a smaller company.

The group made an operating loss of €5.5 billion for 2020 following global travel bans to curb the spread of coronavirus came into effect early in the year drove travel demand to a standstill.

Lufthansa has been haemorrhaging €300 million per month during the pandemic, a stark comparison to the €2 billion in profits the company made in 2019.

However, its logistics unit, which was involved in transporting vaccines, made a steady €772 million in income and is also involved in cargo freighting.

The company's fiscal data show that global passenger traffic was down 72% in January in spite of global vaccine rollout in a number of nations.

The airliner took on 76% fewer passengers in 2020 and has extended its rebooking period until May.

The company also lost 28,000 workers during the crisis, but CEO Carsten Spohr claims the company's new approach could secure 100,000 jobs in the long-term.

He said: "The unique crisis is accelerating the transformation process in our company. 2021 will be a year of redimensioning and modernization for us. The focus will remain on sustainability: We are examining whether all aircraft older than 25 years will remain on the ground permanently.

"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.

“Internationally recognised, digital vaccination and test certificates must replace travel bans and quarantine so people can once again visit family and friends, meet business partners or learn about other countries and cultures."

However, the company claims it may have to shed another 10,000 jobs during the early stages of the transformation.

Lufthansa is looking to permanently retire at least 100 aircraft and expects capacity to reach at least 90% of 2019 levels by the middle of the decade, which may once again allow it to operate larger fleets.

The company's net debt increased by 43% to around €9.92 billion, and overall the company saw a net drop of €6.7 billion, down to €13.6 billion.

However, the airliner managed to return some capital by raising funds via bonds and aircraft financing.

Remco Steenbergen, Lufthansa's financial officer said the company also had an unused stabilisation package, which it can dip into if needed.

"The latest transactions have shown how much confidence the market has in our company. The Lufthansa Group is well-financed beyond 2021," he added.

Read more: KLM ceases long-haul flights under new Covid travel restrictions

The company expects positive cashflow to resume when operating capacity hits around 50% of 2019 levels.

Until then, they expect a further €300 million in losses for at least the first quarter of 2021.

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