The Impact of COVID-19 on Lufthansa: Case Study

The impact of COVID-19 on Lufthansa: Case Study

Summary

Recent months have been unprecedented in the tourism sector. Travel restrictions, flight suspensions, falling consumer confidence and a slew of negative press are just some of the issues airlines are having to contend with. As one of the airline industry's leading players, Lufthansa has been severely impacted.

Key Highlights

Lufthansa is operating a severely reduced schedule, with just six long-haul routes in April, totaling 18 flights per week that constituted an urgently needed basic service.
Lufthansa CEO Carsten Spohr recently stated that in just 65 days, Lufthansa was set back almost 65 years, as the number of flights running per day decreased to post-war levels, when Lufthansa was founded. Whilst flights are grounded, incoming cash for Lufthansa is minimal whilst outgoings are still high.
Where variable costs such as fuel and staff will be lower, this cost reduction only partially offsets the decline in revenue, with a preliminary €1.2 billion (local currency) loss in Q1 2020 forecasted ahead of official results which are due to be posted in the second half of May [8]. Whilst operations have halted, and outgoings are still high due to the capital-intensive nature of its business, Lufthansa is experiencing a cash burn of around €1 million (local currency) per hour.
Lufthansa has taken up many acts of Corporate Social Responsibility, by waiving the purchase fee of 920,000 masks to health authorities in Germany, allowing employees in Germany to be released to work in a medical facility, with salary fully paid. Lufthansa also aided repatriation flights for stranded travelers, to help them get home quickly and safely.

Scope