Lufthansa pledges to ramp up restructuring measures as net loss increases to £1.88 billion in Q1

Lufthansa (ETR: LHA) said on Wednesday that its net loss ballooned to £1.88 billion in the first quarter. The company also pledged to ramp up its efforts on restructuring. Lufthansa’s financial results came only days after its supervisory board agreed to Brussel’s revised conditions for £8.10 billion government bailout.

The air carrier said it will significantly cut costs in the upcoming months and warned that its earnings will take a massive hit in 2020. According to CEO Carsten Spohr:

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

Lufthansa attributes its downbeat Q1 performance to write-downs

The German national carrier printed an 8% intraday gain on Wednesday. At £9.10 per share, Lufthansa is roughly 40% down year to date in the stock market after recovering from £6.42 per share in late April. Learn more about how do people make money on the stock market.  

Lufthansa’s net loss in Q1 was reported higher than £305.68 million in the same quarter last year. The company attributed its downbeat performance to £237.75 million of write-downs ascribed to its fleet, £89.38 million to LSG North America (catering business), and another £50.95 million to its low-cost subsidiary, Eurowings.

The German flagship carrier also said that a decline in fuel hedging contracts resulted in an additional £849 million hit to its bottom line. At the peak of COVID-19 that has so far infected more than 185,000 people in Germany and caused over 8,500 deaths, Lufthansa had grounded almost its entire fleet. In the three months, its loss before interest and tax came in at £1.07 billion. Lufthansa’s shareholders are expected to vote on the government bailout package in the extraordinary general meeting on 25^th June.

Lufthansa Group posts a 98% decline in passenger numbers in April

In terms of passenger numbers, Lufthansa Group that includes Brussels Airlines, Austrian Airlines, and Swiss Airlines, reported a 98% decline in April to 241,000. On Wednesday, the air carrier also revealed plans of boosting its offered capacity later this year in September to 40% of its original schedule before the outbreak.

Lufthansa has remained listed on DAX since the inception of the index in 1988. Owing to its ongoing financial struggles, however, analysts now expect the flagship air carrier to drop out of the blue-chip benchmark index of Germany.

The German airline also performed downbeat in 2019 with an annual decline of more than 15%. At the time of writing, Lufthansa has a market capitalisation of £4.22 billion and a price to earnings ratio of 3.99.