Lufthansa announced on Monday that it plans to cut more jobs and reduce its fleet furthermore. This decision comes as air travel in the summer season was significantly lower than the airline was expecting it to be.
Reducing the Fleet Size
However, the German airline based in Frankfurt said today that it is reducing its fleet size by 150 aircraft out of a total of 760. Moreover, it will also be retiring its remaining eight Airbus 380s. After it took six of them out of service in spring.
It will also be grounding ten A340-600 airplanes with Lufthansa. Noting that “these aircraft will only be reactivated in the event of an unexpectedly rapid market recovery.” In addition, it said the remaining seven Airbus A340-600s will be permanently decommissioned.
Shrinking its aircraft fleet will result in write-downs of €1.1bn (£1bn, $1.3bn) in the current quarter, the airline said. It said it will reduce its cash burn by €100 million per month. It will be from its current outflows of €500m per month during the 2020-2021 winter period.
However, the German airline says that it will be operating at about 20 percent and 30 percent of its capacity as compared to last year.
Cutting More jobs
The airline also says that there will be more job cuts of full-time employees. These will be in addition to the 22,000 that it announced earlier this year. And it is also in discussions with employee representatives regarding staff reductions and compensation.
“A streamlined management structure with a 20 percent reduction of management positions is to be implemented in the first quarter of 2021,” Lufthansa said
However, Lufthansa shareholders in June agreed to a €9 billion German government bailout. Whereas the government will be taking a 20% stake in the airline and getting two seats on the supervisory board.
European Union regulators also signed off on the airline’s €6 billion recapitalization plan in June. On the condition that there will be a ban on dividends, share buybacks, and acquisition. Until it has paid back its state aid.
However, Lufthansa also complied with the EU Commission’s demands to relinquish some landing slots at its hub airports of Frankfurt and Munich to competitor airlines.
The Dutch government allocated €3.4 billion to the bailout of the Air France-KLM airline alliance in June. After France got European Union approval in May to offer a €7 billion bailout to Air France. However, in total, the partner airlines will be getting €10.4 billion in state support.