Lufthansa vows extensive revamp as losses balloon

Lufthansa’s April passenger numbers fell 98 percent year on year as the coronavirus pandemic hit the travel sector. (AFP)
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Updated 04 June 2020

Lufthansa vows extensive revamp as losses balloon

  • Embattled German carrier looks to cut costs after posting $2.3bn 1Q loss

FRANKFURT: Lufthansa has pledged a wide-ranging restructuring, from job cuts to sales of non-core assets, as it seeks to repay a €9 billion ($10.1 billion) state bailout and navigate deepening losses in the face of the coronavirus pandemic.

The pledged cost cuts came as the German carrier posted a first-quarter net loss of €2.1 billion on Wednesday, only days after securing the bailout that is intended to help the airline ride out the crisis but will require it to cede some of its prized landing slots to rivals.

“In view of the very slow recovery in demand, we must now take far-reaching restructuring measures,” said CEOCarsten Spohr.

The group, which includes Swiss, Austrian Airlines and Brussels Airlines, is bracing for a significant decline in 2020 earnings and has begun talks with labor representatives over cutbacks, the company added.

Brussels Airlines will reduce its fleet by 30 percent and its workforce by 25 percent while Austrian Airlines’ fleet and personnel costs are to be cut by 20 percent.

The sale of non-core operations is also on the cards in the medium term, the group said, having postponed the planned sale of parts of airline caterer LSG in March.

The first-quarter loss, which widened from €342 million a year earlier, was driven by writedowns of €266 million on its fleet. There were also writedowns on the book value of LSG North America and budget carrier Eurowings, of €100 million and €57 million, respectively.

A slump in fuel hedging contracts was another €950 million burden on the bottom line.

Shares in the group were up 3 percent in early trade, though analysts expect the national carrier to be removed from Germany’s benchmark blue-chip DAX for the first time since the index was launched in 1988.

Lufthansa’s April passenger numbers slumped 98 percent year on year to 241,000, but it laid out plans on Wednesday to increase capacity in September to reach 40 percent of what it had scheduled before the pandemic.


Oil giants’ production cuts come to 1m bpd as they post massive write-downs

Updated 10 August 2020

Oil giants’ production cuts come to 1m bpd as they post massive write-downs

  • Crude output worldwide dropped sharply after the market crashed in April

LONDON: The world’s five largest oil companies collectively cut the value of their assets by nearly $50 billion in the second quarter, and slashed production rates as the coronavirus pandemic caused a drastic fall in fuel prices and demand.

The dramatic reductions in asset valuations and decline in output show the depth of the pain in the second quarter. Fuel demand at one point was down by more than 30 percent worldwide.

Several executives said they took massive write-downs because they expect demand to remain impaired for several more quarters as people travel less and use less fuel due to the ongoing global pandemic.

Of those five companies, only Exxon Mobil did not book sizeable impairments. But an ongoing reevaluation of its plans could lead to a “significant portion” of its assets being impaired, it reported, and signal the elimination of 20 percent or 4.4 billion barrels of its oil and gas reserves.

By contrast, BP took a $17 billion hit. It said it plans to recenter its spending in coming years around renewables and less on oil and natural gas.

Weak demand means oil producers must revisit business plans, said Lee Maginniss, managing director at consultants Alarez & Marsal. He said the goal should be to pump only what generates cash in excess of overhead costs.

“It’s low-cost production mode through the end of 2021 for sure, and to 2022 to the extent there are new development plans being contemplated,” Maginniss said.

London-based BP has previously said it plans to cut its overall output by roughly 1 million barrels of oil equivalent (BOEPD) by the end of 2030 from its current 3.6 million BOEPD.

Of the five, Exxon is the largest producer, with daily output of 3.64 million BOEPD, but its production dropped 408,000 BOEPD between the first and second quarters. The five majors, which include Chevron Corp, Royal Dutch Shell and Total SA, also cut capital expenditures by a combined $25 billion between the quarters.

Crude output worldwide dropped sharply after the market crashed in April. The Organization of the Petroleum Exporting Countries agreed to cut output by nearly 10 million barrels a day to balance out supply and demand in the market.