Deutsche Lufthansa AG is considering asking the government for help in the midst of the tremendous impact brought about by the novel coronavirus, which has dragged down demand for flight in the past few weeks.
Lufthansa - Germany's flag carrier and Europe's biggest airline - is looking into the imposition of so-called "short-time work," in order to prevent its personnel from losing their jobs after the airline cut capacity by around half, a company representative disclosed in an emailed a statement to Bloomberg on Sunday.
As Lufthansa described the move, it was intended to reduce the financial consequences of the drop in demand and cushions planned savings measures in the area of staff, material costs, budgets, and other liquidity requirements. The airline also carried out a hiring freeze, and is offering workers unpaid leave, while bringing forward annual leave.
Known as "Kurzarbeit" in German, the program involves the government offsetting salaries lost when companies were prompted to temporarily stop operations. With some nations banning flights from Germany, which currently has over 800 coronavirus cases, the effect on Lufthansa's booking situation is "immense," Carsten Spohr, Chief Executive Officer, said in a memo to workers obtained by Bloomberg.
Italy's decision to limit movement for at least 25 percent of its population comes in addition to the cancellation of major events like the Geneva Motor Show and the ITB tourism expo in Berlin. The International Air Transport Association projects carriers may shed as much as $113 billion in ticket sales for 2020.
German Chancellor Angela Merkel's ruling party is gathering on Sunday evening to craft a new strategy to ease the damage from the virus on Europe's biggest economy. Looser rules for Kurzarbeit, which is expected to make it easier for businesses to apply and could hike payouts, are part of the measure.
Meanwhile, Lufthansa has decided to temporarily ground its fleet of 14 Airbus A380s due to a steep drop in ticket bookings since the outbreak of the virus. The airline is only seeing a load factor of around 30 percent on its biggest plane, a stark figure that shows just how severe the decline in demand for air travel has been in the last few weeks.
The jumbo jets will be parked at least through the end of May and will remain at Lufthansa's hangars in Frankfurt and Munich. The company's A380s have a total capacity of more than 500 seats in a four-class accommodation: first-class, business-class, premium economy and economy. Before the coronavirus outbreak worsened in Europe, Lufthansa flew the superjumbos to Miami, Los Angeles, and San Francisco in the United States.
