Lufthansa is buoyant about the summer ahead, with bookings for June and July already well ahead of pre-pandemic levels. But the optimism is tempered by a harsh reality: Staffing shortfalls across the airline industry that could result in less-than stellar flying experiences for travelers.
“The upcoming summer will undoubtedly be a major operational challenge for the whole industry,” Lufthansa Group CEO Carsten Spohr said during its first-quarter results call on May 5. Challenges will be the result of “significant staffing shortages” at airports, air traffic control organizations, and caterers, to name a few, he said.
Spohr’s comments follow a rough April for many airlines. In Europe, British Airways and EasyJet cancelled countless flights amid staffing shortages over the peak Easter travel period. Labor actions hobbled KLM’s home base of Amsterdam Schiphol for several days. And across the Atlantic, Alaska Airlines, JetBlue Airways, and Spirit Airlines all faced operational issues due to both their own staffing and of air traffic controllers. All three U.S. carriers have pared their summer schedules in order to mitigate any future issues during the peak months.
Lufthansa, Spohr was clear, does not face a lack of staff. The group has “extra” flight attendants and pilots that it can put to work to beef up operations as needed, he said in response to analyst questions. However, he did reiterate concerns about staffing at third-party companies that support the group’s airlines, which include Austrian Airlines, Brussels Airlines, Eurowings, and Swiss International Air Lines.
The group plans to fly 85 percent of its 2019 passenger capacity during the third quarter, which covers the peak summer months of July and August. Short- and medium-haul capacity in Europe will hit 95 percent of three-years ago, and the group’s budget arm, Eurowings, will fly more than it did. Long-haul capacity remains down the most versus 2019 primarily due to continued travel restrictions in much of East Asia.
Overall bookings for June and July are at 80 percent of 2019 levels, Spohr said. He described this as “remarkable” given the rapid uptick since the beginning of the year and the fact that the group will fly less capacity than three years ago. Leisure demand is forecast to be above 2019 this summer. Corporate demand is at 50 percent of pre-pandemic levels, and forecast to recover to 75 percent by the end of the year. “People are traveling again,” Spohr said.
The group continues to make progress on its other initiatives. It achieved another €200 million ($211 million) in cost savings — for a total of €2.9 billion to date — in the first quarter towards its target of €3.5 billion in reductions by 2024. And other important financial metrics, including yields and unit costs, continue to normalize as passenger traffic returns, Lufthansa Group Chief Financial Officer Remco Steenbergen said. Yields were down 2.5 percent year-over-three-years during the quarter, while unit costs excluding fuel were up 18 percent.
A new operating subsidiary, dubbed “CityLine 2” by management, aimed at further cost savings is set to launch in spring 2023. The new operator came out of the failure of the group and its pilots union, Vereinigung Cockpit, to reach “any agreement on structural cost savings,” Spohr said. Cityline 2 will operate Airbus A320-family aircraft from Frankfurt and, as far as passengers are concerned, operate just as Lufthansa mainline.
The Lufthansa Group posted a net loss of €584 million in the March quarter, just over half of its loss a year ago. Revenues more than doubled from a year ago to €5.4 billion but were still down 32 percent compared to 2019. Logistics, including Lufthansa Cargo, was again the group’s standout segment with revenues of €1.2 billion, or up 90 percent from 2019. Passenger traffic stood at 48 percent of 2019 on capacity of 57 percent.
Looking forward, Steenbergen said the group anticipates continued financial improvement throughout 2022 without providing specific targets. Yields are forecast to increase at a ” high-single-digit percentage rate” for the balance of 2022, and end the year above 2019 levels. The group has raised its full year capacity guidance by 5 points to 75 percent of 2019.
