Lufthansa sees delayed recovery after US$8.1b record loss

[FRANKFURT] Deutsche Lufthansa posted a record US$8.1 billion annual loss and said it will take longer than previously anticipated to achieve a full recovery from the coronavirus crisis.

Europe's biggest airline group said on Thursday it will struggle to make money on flights before the end of this year as it dials back capacity plans. Chief executive officer Carsten Spohr said there could still be a revival this summer, but only if the pace of jabs allows international curbs to be eased.

"We expect demand to pick up again as soon as restrictive travel limits are reduced by a further roll-out of tests and vaccines," Mr Spohr said in a statement. "Internationally recognised, digital vaccination and test certificates must take the place of travel bans and quarantine." Network carriers like Lufthansa have seen the long-haul markets on which they depend almost wiped out by the pandemic.

Mr Spohr warned that his airline may be able to operate only 90 per cent of its pre-pandemic capacity even by mid-decade, indicating his deteriorating confidence in a revival after the company previously suggested the market could recover fully by 2024.

Lufthansa's reassessment of the hoped-for rebound comes with travel still largely locked down and the European Union struggling to accelerate Covid-19 vaccine rollouts after a sluggish start.

It echoes recently articulated concerns spanning the International Air Transport Association, which said last month airlines could burn through US$95 billion this year, almost double the previous forecast, to planemaker Airbus, which unexpectedly forecast jet handovers will remain at 2020's depressed levels.

Lufthansa now expects to deploy between 40 per cent and 50 per cent of its 2019 capacity levels this year, compared with a previous target of 40 per cent to 60 per cent. That's bad news for profitability, given that it needs to operate with around half of available capacity to stem cash outflows.

Short-haul leisure specialists such as Ryanair Holdings and EasyJet may reap a earlier rebound, especially if a faster vaccination rollout in the UK allows Britons to make a more rapid return to Mediterranean beaches.

The European Union is also three or four months away from issuing coronavirus immunity certificates, raising the prospect of another lost tourism season for the bloc's aviation and hospitality industries, according to a briefing note circulated to national delegations in Brussels on Tuesday.

Lufthansa said it will be able to rush back as much 70 per cent of capacity in short order if demand in its markets picks. The carrier is also expanding its low-cost long-haul business to be ready for a revival in tourism even as corporate travel remains constrained.

BLOOMBERG