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Embattled German airline Deutsche Lufthansa AG reported a Q2 earnings loss of EUR 1.5 billion. LHA stock is up today.
Deutsche Lufthansa AG (FRA: LHA), Germany’s premier airline company has posted a Q2 earning loss. The loss became full-blown as a result of the economic impact of the coronavirus pandemic which affected the airline operations. The reported earnings show that the airline has a second-quarter consolidated net loss of 1.5 billion euros. This is huge compared to the previous year’s profit of 226 million euros.
Lufthansa executive board acknowledged that the coronavirus pandemic has had an impact on the aviation industry unlike any seen before. Consequently, no other sector which is affected by the impact of the global crisis will take longer to recover. In using its fleet to aid the fight against COVID-19 in the quarter spanning April to June, the company explored many options to seek bailout funds, a move that saw the German government inject about 9 billion euros in the company for a 20% stake in the company.
Meanwhile, today LHA stock is 1.17% up, trading at EUR 8.29.
Lufthansa Q2 Loss by the Numbers
Besides the 1.5 billion euros loss in the quarter under review, the Adjusted EBIT, one of the main metrics for determining profitability dropped from EUR 418m in the previous year to EUR –2,899m. Revenue in the first half of 2020 was down by 52% year-on-year to EUR 8,335m.
Owing to the extensive global lockdowns, the operating expenses saw a massive reduction coming down by 59 percent. Of the key operation aspect of the company, the increase in logistics demand in the second quarter spiked and Lufthansa Cargo’s Adjusted EBIT was 299 million euros, compared to the previous year’s loss of 9 million euros.
Owing to the generally poor performance, the company is not optimistic about a profitable 2020 fiscal year while it planned a major shakedown in its operations. It was said in a statement:
“We have already adopted two packages as part of our restructuring program. The first package, approved in early April, involves our decision to reduce the size of our fleet by 100 aircraft as a long-term measure and not to resume flight operations by Germanwings. The measures forming part of the second package adopted at the beginning of July include a smaller Executive Board, a streamlined administrative team and measures to reduce the number of management positions. Efforts are also under way to turn the Lufthansa airline into an autonomous company. Our top priority is repaying state loans and deposits as quickly as possible”.
Besides the 9 billion euros cash injection obtained from the German government back in May, the airline giant also looks forward to getting aid from the governments of Switzerland, Austria, and Belgium.
In its effort to repay state loans and other debt obligations, the company will be downsizing its operations in relation to staff strength. This will be done in order to cut costs. Consequently, in the coming months, the airline will cut about 22,000 staff from its payroll. It will also reduce its management and administrative staff. This is part of a restructuring program dubbed ‘ReNew’ and it is expected to help reduce costs while focusing on what truly matters
With the eventual lifting of the lockdowns, the airline hopes to resume about 40% of last year’s operation capacity by the end of October. This will help LHA fly to over 90% of the Group’s original short and medium-haul destinations, and more than 70% of its long-haul destinations. These projections will help to turn the company’s recent economic woes into a profitable business once again.