Lufthansa warns of 10,000 job cuts as Covid-19 bites

Lufthansa has said that it will be forced to shed roughly 10,000 staff as it becomes a permanently smaller airline due to Covid-19, in one of the starkest signs of the industry's woes since the outbreak began.

In a webcast to employees on Friday afternoon, chief executive Carsten Spohr said the German carrier, which has already furloughed almost 90,000 of its 135,000 employees, was unlikely to return to "normality" until 2023.

“We expect yields to be 10 per cent lower and the load factor on our aircraft to be 10 per cent lower,” he said.

“After the crisis, we will have to spend over a billion euros a year to repay loans.”

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The Frankfurt-based airline, which is seeking state-aid in Germany, Austria, Belgium and Switzerland, also said it would axe 100 aircraft from its fleet of more than 700.

Earlier this week, unions representing Lufthansa employees appealed to Angela Merkel’s government, calling for state aid to be contingent on maintaining jobs.

But on Friday, Mr Spohr implied that such a guarantee would be impossible. “This pandemic will not be over until there is a vaccine available worldwide,” he said.

“We were the first industry to be affected by this global crisis and aviation will be one of the last to leave it,” he added, emphasising that by that point, Lufthansa would be “a different company”.

Virgin Australia

Mr Spohr's warning comes days after Australia's second-biggest carrier, Virgin Australia, became the first large airline casualty of coronavirus, entering voluntary administration after failing to secure a bailout.

If a prediction by the trade body Iata of a 48 per cent fall in traffic this year proves correct, at least seven years of airline passenger traffic growth would be wiped out in 2020, according to consultancy Cirium.

Lufthansa, which is burning through €1 million an hour, said it was flying just 1 per cent of its usual passenger numbers.

On Thursday, the group warned that it was only weeks away from running out of cash.

Despite emphasising last month that it would be able to borrow against a fleet worth about €10 billion, Lufthansa said it could no longer raise money to pay for liabilities such as ticket refunds on the capital markets.

"This leaves government help as the last remaining hope for Lufthansa to remain solvent," said Daniel Roeska, an airline analyst at Bernstein.

The company has already announced several cost-saving measures, including plans to axe its Cologne-based Germanwings brand, and shrink its Eurowings division.

Lufthansa has also been operating without a chief financial officer since the start of the month, after Ulrik Svensson resigned on medical advice. – Copyright The Financial Times Limited 2020