Lufthansa (LH, Frankfurt International) posted a EUR1.2 billion euro (USD1.35 billion) loss for the first quarter of 2020, prompting it to consider selling non-core business units.

The group, belatedly announcing its first-quarter results on June 3 due to the coronavirus pandemic, said the travel restrictions imposed due to the global spread of the coronavirus hit its earnings hard, with group revenue in the first quarter falling by 18% to EUR6.4 billion (USD7.2 billion) compared with EUR7.8 billion (USD8.8 billion) for the previous year. This saw a first-quarter loss before interest and taxation (EBIT) of EUR1.2 billion compared with EUR336 million (USD379 million) for the same period last year.

Lufthansa said crisis-related asset impairments and fuel hedges contributed to first-quarter losses, including EUR266 million (USD300 million) impairment charges on decommissioned aircraft, and EUR157 million (USD177 million) on the goodwill of LSG North America and Eurowings (EW, Düsseldorf). Fuel hedging cost the group EUR950 million (USD1.07 billion) during the first three months of the year.

To reduce costs, the Lufthansa Group said around 87,000 employees are working shorter hours; planned projects and maintenance events are being cancelled, and restructuring programmes at Austrian Airlines (OS, Vienna) and Brussels Airlines (SN, Brussels National) are being further intensified.

“Brussels Airlines plans to reduce its fleet by 30% and its workforce by 25%. Austrian Airlines has decided to reduce its capacity in the long term by downsizing its fleet by 20%, and has agreed with the working councils to cut personnel costs by around 20%,” the group said.

“Restructuring and cost-cutting programmes will also be launched in other Lufthansa Group companies. Negotiations with aircraft manufacturers on extensive postponements of planned aircraft takeovers are continuing. In addition, the sale of individual non-core business units is being examined in the medium term.”

While analysts have speculated Lufthansa Technik may be sold, Lufthansa’s chief financial officer Ulrik Svensson said during a recent earnings call he is confident Lufthansa Technik will still be within the group in five years’ time. In a first-quarter results briefing on June 3, Lufthansa said an initial public offering for shares in its MRO subsidiary had been discussed. Still, the group hopes to keep at least a majority stake in the entity.

Due to a reduction in traffic of more than 95% in April and May, the Lufthansa Group said it had parked 700 of its 763 aircraft, but from mid-June, plans to significantly expand airline schedules to around 2,000 weekly connections to more than 130 destinations worldwide. The company said it is planning on only gradually increasing demand but expects 300 aircraft to be parked in 2021, and 200 in 2022. “Even after the end of the crisis, which is expected to end in 2023, the Group expects its fleet to remain 100 aircraft smaller.”