Deutsche Lufthansa AG said that the airline industry might not survive without state aid if the coronavirus pandemic lasts for a long time, as it throws everything at bringing home stranded travelers and keeping industrial supply chains open.
The German airline group has cut capacity, proposed reduced working time and pay, and suspended its dividend, saying it was impossible to forecast the effects of COVID-19 on profitability.
The desperate outlook came as airline turmoil deepened yesterday, with Australia’s Qantas Airways Ltd telling most of its 30,000 employees to take leave and India preparing a US$1.6 billion rescue package to aid carriers.
“The spread of the coronavirus has placed the entire global economy and our company as well in an unprecedented state of emergency,” Lufthansa CEO Carsten Spohr said in a statement. “At present, no one can foresee the consequences.”
Lufthansa, which also owns Swiss International Air Lines AG, Austrian Airlines AG and Brussels Airlines, has carried out and planned 140 relief flights to repatriate stranded citizens in what has been described as the biggest operation of its kind.
“In addition, we are doing our utmost to help ensure that supply chains for many thousands of businesses do not break down by mobilizing additional capacity for air freight transport,” Spohr said.
Lufthansa has already held talks with the German government on providing liquidity, including through special loans from state development bank KfW.
“The longer this crisis lasts, the more likely it is that the future of aviation cannot be guaranteed without state aid,” Spohr said.
As governments across the world close borders and airports, the Lufthansa group has been forced to make drastic cuts in its flight operations.
Austrian Airlines is suspending operations until Saturday next week, with the exception of special flights, after its last regular scheduled flight to Vienna landed yesterday.
Lufthansa is also discontinuing long-haul flights from Munich and for now would only offer long-haul flights from Frankfurt, it said, announcing a reduction of passenger flights by 95 percent overall.
About 700 of the group’s 763 aircraft would be temporarily parked. Some passenger planes might be redeployed to shift freight.
In order to secure its finances, Lufthansa said it had raised an additional 600 million euros (US$648 million) in recent weeks, giving it liquidity of about 4.3 billion euros.
In addition, it has unused credit lines of about 800 million euros and is looking to raise further funds, including through aircraft financing.
“We own 86 percent of the group’s fleet, which is largely unencumbered and has a book value of around 10 billion euros,” chief financial officer Ulrik Svensson said.
The executive board would take a 20 percent pay cut, Lufthansa said.
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