Restructuring at Lufthansa leaves freighter fleet plans intact

[caption id="attachment_412867" align="alignright" width="408"] Lufthansa's ambitious restructuring plan does not affect renewal plans for its freighter fleet and LH Cargo will add to its fleet two more 777Fs.[/caption] Lufthansa Group’s outstanding order with Boeing for two 777Fs remains unaffected despite the fact that the Lufthansa Cargo parent will halve its investment in aircraft between now and 2023, and continues to reduce some of the estimated 22,000 jobs made redundant by the crisis, Cargo Facts has learned. The Germany-based group this week approved a second set of austerity measures for its enterprisewide restructuring program in response to the coronavirus crisis. An additional 1,000 administrative jobs will be axed, leadership positions will be cut by 20%, and a new belt-tightening initiative will cap new aircraft deliveries at eighty units by 2023. Despite being the lifeline of the group during the crisis, Lufthansa Cargo won’t emerge completely unscathed. Martin Schmitt, previously chief financial officer and labor director, is no longer part of the executive board, and his duties have been taken up by Chairman and CEO Peter Gerber. While Lufthansa Cargo may see up to 500 job cuts, according to the group’s first mention of its ReNew restructuring scheme June 22, its plans to phase out the remaining MD-11Fs in its fleet and add two 777Fs will proceed. “Our plan was, and is, to fully shift to Boeing 777 freighters in 2021. We look forward to receiving two more brand-new freighters of this type in the remainder of this year,” a Lufthansa Cargo spokesperson confirmed to Cargo Facts . The order for two 777Fs was first announced in November 2019 . Prior to the COVID-19 crisis, the company had considered accelerating the retirement timeline for its MD-11F fleet , which today numbers six active units. As demand for freighter lift surged in late Q1 and bellyhold capacity cratered, those plans were quickly scrapped. At least three of the remaining MD-11Fs have already been sold to UPS, confining the carrier’s flexibility to prolong large-scale MD-11F operations much longer. On June 25, Lufthansa shareholders approved a $10 billion bailout from the German government. The company expects the loans and credit guarantees will help it skirt insolvency, but only in combination with restructuring that aligns its businesses with the current realities of the aviation industry. In exchange for assistance, the German government received a discounted 20% direct stake in the company and made additional support conditional on debt repayment. Failure to repay the government loans could increase the state’s stake in the airline, making repayment a priority for Lufthansa. “Government loans and equity participations are to be reduced as quickly as possible to avoid a further increase in interest charges,” Lufthansa officials stated in this week’s update. On July 6, the Federal Republic of Germany became the largest shareholder in the company, according to an announcement on the Frankfurt Stock Exchange. The government’s stake in Lufthansa surpassed 20.5% as it took ownership of discounted shares related to Lufthansa’s rescue package. Additional layoffs are expected as the company this week reiterated estimates of redundancies numbering at least 22,000 full-time positions, even as it emerges from the crisis. Future cuts will be dependent on the outcome of negotiations between Lufthansa and its labor unions.

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