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Flight cancellations

Lufthansa fears refunds of billions of euros

While the negotiations on state aid continue, Lufthansa is spending around 800 million euros a month. And it is faced with high refunds for cancelled flights.

Lufthansa/Oliver Roesler

Parked Lufthansa aircraft in Frankfurt: The state is going to help.

What does the state aid for Lufthansa look like? That was the big question before the Group’s virtual General Meeting on Tuesday morning (5 May). Of the 246 questions submitted, 45 alone revolved around this topic. However, Lufthansa CEO Carsten Spohr and Co. had no new information, but merely referred to ongoing and confidential talks with the German government. Nevertheless, the General Meeting delivered exciting figures on the current situation of the airline.

For example, it was about the refunds to which passengers whose flights were cancelled are entitled. «We ask for your understanding that in the current situation refunds are not possible within the usual deadlines,» said Lufthansa Executive Board member Michael Niggemann. He also quantified the potential costs for the Lufthansa Group: «The flights cancelled by 31 May will result in potential repayment obligations of 1.8 billion euros,» said Niggemann. However, passengers would also be offered vouchers and flexible rebooking options as an alternative to reimbursement.

«It could endanger the entire travel industry»
Lufthansa CEO Carsten Spohr had previously said in his speech: «Most European countries support the time-limited voucher solution for cancelled tickets.» However, the EU has not yet been able to bring itself to agree to such a regulation. «It could endanger the entire travel industry if we continue to have to make immediate cash refunds at this stage,» warned Spohr. «In addition, our customer centres and processes are not designed for this large number of refunds,» he said. He therefore asks the customers for their understanding.

Lufthansa currently uses up around 800 million euros of its liquidity per month, as Niggemann explained in response to a question. This would be compounded by further burdens such as the lack of advance payments by customers. Lufthansa expects a burden of around one billion euros in 2020 from the hedging of fuel that has not been purchased after all – so-called fuel hedging – alone, if it can resume flight operations in summer with very limited restrictions and the oil price does not change much.

By 2023, 33 new jets should actually come on stream
As far as new aircraft are concerned, the Lufthansa Group had originally agreed with the aircraft manufacturers to purchase a total of 33 new jets between 2020 and 2023. The models: Airbus A320 Neo, A321 Neo, A220, A350 as well as Boeing 777-9 and 787-9. Lufthansa CEO Spohr said that 2.5 billion euros per year had been budgeted for this. But now the situation has changed. «The executive board is planning postponements to the following years and is in intensive negotiations with Airbus and Boeing», said Spohr.

Lufthansa assumes that the air traffic market will have «found a new balance» in 2023 at the earliest, Spohr continued. However, there is a risk that even then demand will be below that of 2019. The manager’s short-term hope is a first cautious expansion of supply in the coming month: «We believe by mid-jun we will be able to take the next step.»

Online Annual General Meeting significantly cheaper
Meanwhile, Lufthansa has saved money by holding the AGM as a purely online event. The costs were 760,000 lower, Spohr said. If it had not been necessary to reschedule at short notice, even more money would have been saved.

We’re on a break. Due to the Coronavirus pandemic we have decided to halt our English publication for a while and concentrate on our other ventures. But we’ll be back. Meanwhile you can find all our news, insights and more on our German site.


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