Germany's Lufthansa plots course for leaner post-pandemic future

© Reuters. FILE PHOTO: Planes of German air carrier Lufthansa are parked at Frankfurt airport in Frankfurt, Germany, June 2, 2020. REUTERS/Kai Pfaffenbach

By Thomas Escritt

BERLIN (Reuters) -Germany's Lufthansa has laid out plans to return to profitability as a leaner, more thinly-staffed airline with fewer planes after the pandemic, while banking on a capital increase to help it repay state aid.

Lufthansa was pushed to the brink by the coronavirus pandemic in 2020, when travel restrictions led to a collapse in air travel, forcing it to take 9 billion euros ($11 billion) in aid from Germany and its other home countries.

"Lufthansa Group is determined to accelerate its transformation in order to come out of the crisis stronger," Germany's largest airline said in a statement late on Monday.

Lufthansa said it aims to have an adjusted earnings before interest and taxation (EBIT) margin of at least 8% and an adjusted return on capital employed (ROCE) of at least 10% in 2024. Its adjusted ROCE was –16.7% in 2020 and 6.6% in 2019.

The airline said it aimed to cut costs by 3.5 billion euros by 2024 compared to 2019, the last year before the pandemic.

The plans envisage a fleet that will be 20% smaller but more efficient, and a 1.8 billion euro reduction in staff costs.

Investors greeted the plan with caution, with shares up little over 1% in pre-market trading on Tuesday.

"Lufthansa ... has presented the most comprehensive and long-term outlook of any European airline to date," said Bernstein analyst Daniel Roeska.

"We expect investors to greet today's plan with an ounce of caution given the high dependency on labor cost reduction in the plan," Roeska added.

Germany, which owns 20% of the company after last year's bail-out, will have to consent to the capital-raising plan, the full details of which have not yet been published.

At Lufthansa's last general meeting in May, shareholders gave approval for it to raise up to 5 billion euros in capital in order to help repay the state aid. The company said at the time that it would not need the full amount.

($1 = 0.8240 euros)