Lufthansa says hundreds of its aeroplanes will remain grounded until 2022 due to COVID-19

Lufthansa says hundreds of its aeroplanes will remain grounded until 2022 due to COVID-19

  • Lufthansa says hundreds of its aeroplanes will remain grounded until 2022 due to COVID-19.
  • The German airline says its catering and maintenance businesses may also see deeper layoffs.
  • The air carrier is currently in the final stage of negotiations for a £8.93 billion bailout.

In its announcement on Wednesday, Lufthansa (ETR: LHA) said that hundreds of its aeroplanes are likely to remain grounded until 2022 due to the ongoing Coronavirus pandemic that has brought the global air travel industry to a near halt.

The company also highlighted that deeper layoffs in its catering and maintenance businesses may even turn into a necessity in the upcoming months to shore up finances and cushion the economic blow from COVID-19.

The flu-like virus has so far infected more than 177,500 people in Germany and caused over 8,100 deaths.

At £7.12 per share, Lufthansa has so far seen a 1% intraday gain on Wednesday after recovering from a low of £6.88 per share in the morning session. Learn more about how do people make money on the stock market.

Lufthansa estimates 300 aircraft to remain grounded in 2021

Lufthansa’s executive board told the staff in a letter on Wednesday that 300 aircraft are expected to remain grounded next year while 200 will still be grounded in 2022. According to the letter:

“In the summer of 2023, when we will hopefully will have put this crisis behind us, we will still likely have a fleet that is 100 aircraft smaller.”

As per the annual report of the German national air carrier, at the end of the last year, Lufthansa had a total of 763 planes in its fleet. The letter also highlighted on Wednesday that Lufthansa’s Technik (maintenance unit) and LSG (catering business) are likely to face deeper job cuts in the upcoming months.

Lufthansa suspends dividend for 2019

In separate news, Lufthansa suspended its dividend for 2019 in the first week of May. The 2nd largest airline in Europe is currently in the final stage of negotiations for a bailout that is valued at £8.93 billion.  

With governments starting to ease restrictions after nationwide lockdowns to minimise the fast spread of COVID-19, Lufthansa said last week that it plans on restoring its partial capacity. The airline said that flights to a few destinations including Mumbai, Toronto, and Los Angeles will be resumed in June.

At the time of writing, Lufthansa is more than 50% down year to date in the stock market. Its performance in 2019 was also reported downbeat with an annual decline of roughly 15%. The German airline is currently valued at £3.46 billion and has a price to earnings ratio of 3.10.

By Wajeeh Khan
Mr. Khan specialises in Public Health by academia but is a trader by passion. Taking up two new hobbies of writing and trading in his teen years, he is now a professional trader and news writer with over 5 years of experience in various financial markets. Khan is passionate about bringing insightful articles to his readers and hopes to add value to their portfolios.

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