After the summer is gone the biggest European airlines continue the fight for survival.
Travel demand picked up a little over the months of June, July, and August. However, it wasn’t enough to help airlines minimize financial losses and to help them go through the even slower winter 2020/21 season without decreasing flight schedules or laying off staff.
With restrictions still in effect air travel in Europe continues to be near a stand still.
The Lufthansa Group, the Air France-KLM alliance, and the International Airlines Group (AIG) were the top three airline groups that dominated the European travel market by revenue for 2019. Without the help of their respective governments these airlines might have been bankrupt by now.
Lufthansa Group moves forward with further cuts
Lufthansa Airlines and its subsidiary passenger airlines Austrian Airlines, Swiss Air Lines, Brussels Airlines, and Eurowings form the Lufthansa Group.
Because of significantly lower air traffic recovery than what was expected in summer 2020 the Lufthansa Group seeks to decrease operating cash flow by 100 million euros per month (118 million dollars) moving forward.
The measure is part of Lufthansa third package within their restructuring program announced in a statement on September 21 on lufthansagroup.com.
The decrease operating cash flow would mean further job cuts, more parked aircraft, and change in the number of upper management positions to streamline operations and remove redundancies.
The Lufthansa Executive Board previously assumed that during the summer the company would reach a level of 50% of the previous year’s operation value in the fourth quarter of the year. However, this is no longer a realistic assumption.
“If the current trend continues, the available seat kilometers will probably only be in a range between 20 and 30 percent, compared to the previous year.”, says the statement.
Lufthansa took six Airbus A380s out of service in the spring. It currently has eight more A380s and ten A340-600s, which were previously intended for flight service. These aircraft will be transferred to long-term storage and removed from service. They will only be reactivated in the event of an unexpectedly rapid passenger demand.
Lufthansa has another seven Airbus A340-600s that will be permanently decommissioned.
To reduce operation cost and to move to more fuel efficient double engine jets Lufthansa removed its quad jets from operation including the Queen of the Skies Boeing 747. This is a common practice by airlines now seen in the industry.
Removing quad jets is a trend that airlines around the world realized need to do as soon as possible. Due to the pandemic these large aircraft fell out of favor among airlines as their operation cost is too high regardless if they stay parked or in operation.
Removing wide body jets inevitably leads to the loss of jobs for thouse who operated and maintained these aircraft starting from ground crews, airport staff to flight attendants and pilots.
“The previously announced personnel surplus amounting to 22,000 full-time positions will increase as a result of the decisions taken in regards to the third package within the restructuring program.” stipulated the Lufthansa Executive Board in their announcement.
By the beginning of August 8,000 employees have already left the Lufthansa group. Most of these employees are from other countries and 75,000 employees working less hours per day since June.
In the beginning of the summer the German government stepped in to the rescue of Lufthansa and agreed to a €9 billion (over $10 billion) bail out deal becoming the largest stakeholder in the company.
It looked that Lufthansa was up to a fresh start; unfortunately, one that was short lived.
The situation at the Franco-Dutch airlines alliance is rather dire.
In August Air France-KLM announced that they lost 10 million euros (nearly 12 million dollars) per day because of the the global corona-virus pandemic.
Unless the alliance takes swifts measures to reduce financial loss the future of KLM and Air France is hard to predict.
Dutch and French governments already gave the airlines 10 billion euros (nearly 12 billion dollars). However, according to a recent statement by Air France-KLM CEO Ben Smith this will help the airlines to continue for no more then a year.
In June both airlines said they will cut jobs. Air France promised to lay off nearly 7,600 and KLM close to 5,000 airline employees.
KLM employed 33,000 employees before the pandemic hit. It seeks to reduce this number by 20 percent by 2022 or for the total of 6,600 employees.
Further cuts may become necessary, according the KLM.
UK airlines appeal to the British government for help
The International Airlines Group (AIG) owns British Airways, Iberia, BMI, Vueling, Aer Lingus, and Air Europa. It was the third major player in the European airline market for 2019.
In the beginning of September BBC reported the the AIG wants to continue to cut flights in a response to the pandemic and to the record slow travel demand.
Similarly to Lufthansa Group the AIG saw a delay in recovery in the industry contrary to their expectations predicting going to full pre-covid levels by 2023. A late July statement by The International Air Transport Association (IATA), however, doesn’t see recovery by year 2024
At British Airways (BA) over 8,000 airline employees have already left voluntary. BA aims to rid of some 13,000 employees in total.
In September Ryanair, EasyJet, BA and Virgin Atlantic urged the UK Prime Minister Boris Johnson to help save the UK airline industry.
The situation at Virgin Atlantic, Ryanair, EasyJet
Virgin Atlantic which is another major UK international airline announced that from its pre-covid 10,000 employees, it has already laid off more 3,500.
Virgin did not receive help from the UK government but was able to secure from private funding 1.2 billion pounds (nearly 1.6 billion dollars) to ensure its short term future and restructuring plans.
The biggest EU budget operators Ryanair and EasyJet ranked 6th and 7th place by revenue for 2019 by statista.com also face critical times.
EasyJet has already closed its UK bases in at Stansted, Southend and Newcastle letting go of 670 employees. In May the airline announced that it planed to cut some 4,500 jobs.
Ryanair will cut capacity by 20% for September and October because of low travel demand.
Will the industry ever recover?
“I do not see the industry ever going back to the way it was, because there is so much repair that’s going to have to be done” said Willie Walsh in September. Walsh is a former chief executive of AIG.
Airlines are currently being helped by their respective governments in mass. What they received are loans and not donations. Loans have to be repaid sooner or later.
Even if the pandemic passes, and even if the travel demand picks up airlines will still be limited in their post-corona-virus growth by having to pay back what they owe.