Lufthansa stems losses despite slower recovery outlook

[BERLIN] Lufthansa lowered its full-year capacity forecast as hopes dwindle for an early summer travel rebound, but the German airline's cost-cutting drive narrowed quarterly losses.

The group, which also includes Austrian Airlines, Swiss and Eurowings, said on Thursday it expected to fly at about 40 per cent of its pre-pandemic capacity, trimming the 40-50 per cent guidance issued less than two months earlier.

Lufthansa said it expected a gradual demand pick-up in April-June and a "significant market recovery" in the second half, citing moves by the European Union towards opening up transatlantic travel to vaccinated US visitors.

"We know that bookings shoot up wherever restrictions are loosened and travel becomes possible again," chief executive Carsten Spohr said in a statement.

The travel industry has suffered many false starts to a longed-for recovery, beset by new restrictions, virus variant outbreaks and a sluggish European vaccine rollout.

Lufthansa's adjusted loss before interest and taxes (EBIT) narrowed by 30 per cent to 1.14 billion euros (S$1.83 billion) in the first quarter, helped by a 19 per cent workforce reduction and 51 per cent decline in operating expenses, while the net loss halved to 1.05 billion.

Both numbers beat expectations, based on the median analyst estimates in company polling. Free cash flow came in at a negative 235 million euros per month, also better than the monthly 300 million euro cash burn previously flagged.

The cargo business - a bright spot for crisis-hit airlines as grounded passenger jets squeeze capacity and boost prices - set a 314 million-euro operating profit record in the quarter.

Lufthansa has pledged swift progress in paying down debt from a nine billion-euro government-backed bailout last year and will seek approval at a May 4 shareholder meeting to raise up to 5.5 billion euros in new capital.

Net debt rose by one billion euros over the first quarter to 10.9 billion euros at March 31, it said.

REUTERS