Lufthansa charts the course for recovery and profitability
Lufthansa (LH, Frankfurt Int’l) aims to strengthen its balance sheet with a capital increase, she confirmed this week, outlining her plans for a post-pandemic future and a return to profitability with a smaller fleet and less of employees.
The company “mandated four banks to help calibrate” the possible capital increase, a move that would “be a clear path to leave the stabilization package in Germany and possibly the other countries that helped us in the crisis behind us. “said the general manager. Carsten Spohr said during a virtual presentation.
A year ago, in June 2020, the pandemic forced Lufthansa to accept 9 billion euros ($ 10.1 billion at the time) in aid from Germany and its other domestic markets. But he said this week that the net proceeds of a capital increase would notably help repay these stabilization measures and “restore a long-term sustainable and efficient capital structure.” He did not give a date or size for the measurement.
He added that the Economic Stabilization Fund (FSE) “plans, given market conditions”, to participate in the capital increase, in which case it can place shares with investors and sell subscription rights on the free market.
Lufthansa said it expected the German state, which now owns 20% of the company after the bailout, to accept its stimulus package, especially since it would not involve a new one. injection of public funds. In early May, the company obtained approval from its shareholders to raise up to 5.5 billion euros ($ 6.6 billion) in additional cash.
The further rationalization of the Lufthansa Group will also result in certain divestitures, including the AirPlus International business travel payment unit and possibly the sale or issue of a minority stake in Lufthansa Technik, “once the fair value can be realized “.
The stimulus plans foresee a reduction in costs of 3.5 billion euros (4.2 billion dollars) by 2024 compared to 2019. It has already “achieved a workforce reduction” of 26,000 people, 137,000 to 111,000, during the year until the first quarter of 2021..
The group’s fleet, which includes Lufthansa, Austrian Airlines, Swiss, Eurowings, Brussels Airlines and Air Dolomiti, will be 20% smaller but more efficient thanks to a process of “modernization and standardization”.
The presentation summarized that of its approximately 800 planes in July 2019, approximately 250 are in the process of being phased out but will be partially offset by new deliveries of 60 short-haul aircraft and 20 jets and long-haul freighters to constitute a operational fleet in July 2023 of around 650. aircraft, with moderate growth expected from 2024. The simplification also includes the “closure of several bases and sites”.
“We are past the low point of the crisis,” proclaimed Spohr. “We expect operating cash flow to be positive already this quarter. We are confident that we will achieve an adjusted EBIT margin of at least 8% by 2024. ”
He stressed that increasing vaccination rates in Europe and the EU’s upcoming digital green pass would make short-haul travel easier in the months to come.
“The capacity offered on European short-haul has more than doubled in less than three months. Bookings more than doubled compared to March and April, mostly in the short term, but also increasing for leisure travel in August and September. It is also clear that business travel will pick up, ”he said. “Of course, we are not yet back to normal after this unprecedented crisis, but in our opinion now is the time to look to the future with confidence. At Lufthansa, we are moving from crisis mode to transformation mode.