Germany's largest airliner Lufthansa has reported a positive cash flow for the first time since the coronavirus pandemic hit and has suffered a far narrower quarterly loss than expected.
Lufthansa has reported continued losses throughout the pandemic and has resorted to severe cost cuts to maintain growth. Credit: Christian Junker / Flickr (Licence: CC2)
Pre-tax earnings for Q2 2021 sit at -€943 million, according to the company's latest quarterly report. However, it also reports a positive cash flow of €340 million, while its cargo business - which continues to be used in the transport of vaccines - remains profitable.
The company cites early cost-cutting measures as one of the reasons why it has been more successful in this quarter compared to the rest of the crisis. The airliner originally announced these methods in March, expecting to operate at 70% capacity for the summer holiday period.
Read more: Lufthansa prepares for strong growth following record annual loss
Part of these measures included slashing its workforce by 20%, as per its forecast earlier in the year. The company also reports that strong vaccine demand has boosted passenger numbers.
In June alone, numbers were nearly double those reported at the start of the quarter, with capacity for the month at 40% of pre-crisis levels.
The company has revealed it will continue to cut costs by more than €3.5 billion by 2024, with measures having already been implemented for more than half of the cost reductions thus far. This means more staff will lose their jobs as the company tries to maintain perpetual growth.
The airliner's original plans were to have accomplished these goals by the end of the year. The company report it expects to let go 1,500 ground staff and just under 400 cockpit employees in Germany alone, presumably through redundancy schemes.
2,000 full-time jobs will be cut by the end of the year, including some 500 forced dismissals.
The company states it had roughly 108,000 employees globally at the start of the year, meaning 30,000 staff having left the company at some point since the onset of the pandemic.
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The group's CEO Carsten Spohr said the loss of the "30,000 colleagues hurts us all", but claims the cuts are necessary to save the "over 100,000" remaining.
"This unique crisis is also a unique opportunity for us to accelerate the transformation of Lufthansa in order to consolidate our global leadership role," he added.
Group sales in the second quarter amounted to €3.2 billion, a 70% increase on the same period last year. In total, 7 million passengers have been carried in the last seven months, roughly 19% of 2019 levels.
Lufthansa's main European rivals, KLM and British Airways have also reported positive cash flow for the second quarter.
However, the German airliner is far more cautious in its recovery, having lowered its original estimates from 70% of full capacity down to 50% for Q3.
Read more: Lufthansa suffers €1bn loss in first quarter
Air travel to both North America and Asia should open up later in the year, which could also increase demand. Regardless, the airliner expects to continue operating at pre-tax losses for the rest of 2021.
Remco Steenbergen, Lufthansa's CFO said: "In our financial management, our focus remains on strengthening our balance sheet. The second quarter was another step in the right direction. However, there is no way around making the Lufthansa Group profitable again as quickly as possible and implementing further cost reductions."
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