UPDATE 3-Lufthansa vows extensive revamp as losses balloon

FRANKFURT (Reuters) – Lufthansa has pledged a wide-ranging restructuring, from job cuts to sales of non-core assets, as it seeks to repay a 9 billion euro ($10.1 billion) state bailout and navigate deepening losses in the face of the coronavirus pandemic. The pledged cost cuts came as the German carrier posted a first-quarter net loss of 2.1 billion euros on Wednesday, only days after securing the bailout that is intended to help the airline ride out the crisis but will require it to cede some of its prized landing slots to rivals. “In view of the very slow recovery in demand, we must now take far-reaching restructuring measures,” said Chief Executive Carsten Spohr. The group, which includes Swiss, Austrian Airlines and Brussels Airlines, is bracing for a significant decline in 2020 earnings and has begun talks with labour representatives over cutbacks, the company added. Brussels Airlines will reduce its fleet by 30% and its workforce by 25% while Austrian Airlines’ fleet and personnel costs are to be cut by 20%. The sale of non-core operations is also on the cards in the medium term, the group said, having postponed the planned sale of parts of airline caterer LSG in March. The first-quarter loss, which widened from 342 million euros a year earlier, was driven by writedowns of 266 million euros on its fleet. There were also writedowns on the book value of LSG North America and budget carrier Eurowings, of 100 million and 57 million euros respectively. A slump in fuel hedging contracts was another 950 million euro burden on the bottom line. Shares in the group were up 3% in early trade, though analysts expect the national carrier to be removed from Germany’s benchmark blue-chip DAX for the first time since the index was launched in 1988. Lufthansa’s April passenger numbers slumped 98% year on year to 241,000, but it laid out plans on Wednesday to increase capacity in September to reach 40% of what it had scheduled before the pandemic. ($1 = 0.8917 euros)

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