“Good bye, Airbus A380!” Will soon also be the motto at Lufthansa, because the phasing out of this type of aircraft is planned as part of the third savings program. The board of directors presented the “ReNew” project to the board of directors on Monday in order to save considerable costs. The shedding of thousands of employees is also imminent, but they want to negotiate with the unions.
The company management around CEO Carsten Spohr had to correct the previous demand forecast. As a result, capacity is being reduced across the group. Up until now, it was assumed that around half of the previous year's level could be offered in the fourth quarter of the year. Due to the latest developments in the area of Corona, the Kranich-Spitze no longer believes this to be realistic and is now reducing capacity to 20 to 30 percent. As a result, there will be drastic cuts in the winter flight schedule for all airlines that belong to the Lufthansa Group.
There are also changes in the fleet. The aircraft fleet is to be permanently reduced by 150 machines. Six Airbus A2020s were finally decommissioned in spring 380. The eight other aircraft of this type and ten Airbus A340-600s now suffer the same fate. These are transferred to so-called long-term storage. Lufthansa no longer plans to use these aircraft and announced that they will only be put into service if the market situation changes drastically and positively. Another seven Airbus A340-600s will be permanently decommissioned. The aforementioned fleet decisions will result in further write-downs in the order of magnitude of up to 1,1 billion euros. The amount should still be posted in the third quarter of the current year.
With regard to the staff, it was previously assumed that around 22.000 full-time positions would be superfluous. Due to the decision to reduce the size of the fleet, this number will increase again. The adjustment of the permanent staffing levels in the flight operations will be adapted to the further development of the market. The compensation and reduction of personnel overcapacity will be discussed with the responsible employee representatives.
Irrespective of the negotiations on reconciliation of interests and social plans for compulsory layoffs in the Lufthansa Group, the aim of the Executive Board remains to agree crisis packages with the social partners that limit the number of compulsory layoffs. Lufthansa did not say how many people will lose their jobs.
Despite the gloomy outlook, the revised financial planning provides for further reductions in cash outflows through strict cost management. The liquidity outflow is to be reduced from currently around 500 million euros per month to an average of 400 million euros per month in winter 2020/21. The communicated corporate goal of generating positive operating cash inflows again in the course of 2021 is confirmed.
A leaner management structure with a 20 percent reduction in the number of management positions is to be implemented in the first quarter of 2021. To simplify and clearly define responsibilities, the functional process organization (matrix) is focused on the core functions of the Lufthansa Group airlines. A new control model with clearly assigned responsibilities (decentralized or centralized, depending on the process) will be introduced for all other areas.
The administrative areas are checked worldwide and reduced by 30 percent in Germany. In the opinion of the Board of Management, short-term adjustments to the current market situation will be inevitable for the foreseeable future in view of the continuing great uncertainty in global air traffic. The Executive Board sees the expansion of corona tests as an essential prerequisite for resuming global mobility. Consistent testing is possible, increases safety for travelers and, in contrast to changing and inconsistent entry and quarantine regulations, is the better alternative.