Lufthansa Group decided Mar. 6 to cut capacity by up to 50% and is considering grounding its fleet of 14 Airbus A380s.
The airline announced the move as a result of the spread of the virus causing COVID-19 and a “drastic decline in bookings as well as numerous cancellations.” The actual degree of cuts will depend on how demand develops in the coming weeks.
The decision applies to all airlines in the group including Lufthansa, Eurowings, Austrian, Swiss and Brussels Airlines.
Lufthansa had previously planned to reduce European capacity by up to 25% and take the equivalent of 150 aircraft out of service. It is one of many airlines that have pulled out of China and Iran and has already drastically reduced capacity to other markets particularly affected by the coronavirus outbreak, in Europe, mainly Italy.
The A380 fleet is evenly split between bases in Munich and Frankfurt. In 2019, the airline agreed with Airbus to an early return of six A380s to the manufacturer in 2022 and 2023 as it ordered more A350s. Like Air France-KLM, it has been struggling to make the A380-related economics work, particularly in the winter when demand is lower seasonally.
Lufthansa’s increased cuts are accompanied by a deeper cost reduction program that does not yet include mandatory redundancies. Instead, the airline tries to agree with workers and unions new part-time models, unpaid leave and other ways to reduce costs. It has cut down on project and material costs and is working on further measures to protect liquidity. Like other airlines it offered customers the opportunity to change travel dates for near-term journeys, moving them out until up to the end of December.
Several of its airline units—Brussels Airlines, Austrian and Eurowings—had been loss-making even before the latest crisis, while the core brand Lufthansa and Swiss have made significant profits recently. Lufthansa plans to release an update on its financial guidance on Mar. 19.