German airlines Lufthansa has served notice to its German workers for compulsory lay-offs on Thursday as the embattled airline the job cuts were unavoidable as it had made a loss of 1.7 billion euros ($2 billion) in a single quarter and the nearly wiping of air travel demand because of the novel coronavirus pandemic and slow progress in union negotiations.
Between April and June this year, just 4 per cent of the number of passengers that the airline had flown in the same period a year ago was flown by it as air travel virtually came to a standstill amid travel restrictions imposed due to the pandemic. Despite securing a 9 billion euro state bailout in June, the German airline is still in trouble as it expects an increase in flying demand and capacity by only about 50 per cent by the end of the current year and about two thirds of the total demand of 2019 being reached in 2021.
The outlook for business in the short term as predicted by Lufthansa was more pessimistic than those made by its rivals including Air France-KLM, which expects to see an increase in demand and capacity to about 80 per cent of the pre-crisis demand by next year. British Airways and Iberia owner IAG also forecast just a 24 per cent fall in demand and capacity for 2021.
But new localized outbreaks of the pandemic and consequent restrictions have undermined some signals of the tentative recovery of the European economy which has hit European operations of Lufthansa while its long-haul flight such as those to the United States – which are crucial for the airline, have not been possible because of rising rates of infections.
Demand for air travel is not expected to return back to pre-crisis levels until 2024, according to comment made on Thursday by Lufthansa Chief Executive Carsten Spohr. This was similar to the forecast made by the International Air Transport Association (IATA) last month.
The lingering talks with the unions has caused loss of patience of the airline, said its executives. The airline has already announced its plans to shunt about 20 per cent jobs in leadership positions as well as 1,000 administrative jobs.
The airline aims to reduce 22,000 full-time jobs and said it had 8,300 fewer employees by the end of June primarily because of employees leaving jobs at its catering business and non-German businesses such as at the Swiss, Austrian Airlines and Brussels Airlines.
The airline also reported its worst quarterly performance in its 65-year history with an adjusted operating loss of 1.7 billion euros for the latest completed quarter due to the hit to air travel demand because of the pandemic. That amount was lower than the average analyst forecast in a company-compiled consensus by 300 million euros. The major performer during the quarter for the airline was its cargo business which gained from a shrinkage in global air freight capacity.
Lufthansa plans to cut capital expenditure to 1.3 billion euros this year and next, below the levels of Air France-KLM and IAG.
(Adapted from HindustanTimes.com)