Lufthansa Group is in talks with the home governments of its various airlines over financing support after revealing it expects to post a €1.2 billion ($1.3 billion) adjusted EBIT loss for the first quarter of 2020 with deeper losses to follow in the second quarter.
In a trading update Lufthansa Group says preliminary results show its first quarter revenues were down 18% to €6.4 billion - and fell by almost half to €1.4 billion in March, as the coronavirus spread through Europe.
It notes that cost-cutting measures could only partially offset the slump in revenues, resulting in the group adjusted EBIT loss for the three months ending March of “around” €1.2 billion. That compares to a loss of €336 million in what is traditionally the weakest quarter for the airline.
”The group expects crisis-related asset impairments and the negative development of the value of fuel hedges to have a further significant negative impact on group profit in the quarter,” it adds. Details will be published in its quarterly financial statement, which has been postponed to the second half of May from 30 April.
”At present, it is not possible to foresee when the group airlines will be able to resume flight operations beyond the current repatriation flight schedule,” it adds. ”The group therefore expects a considerably higher operating loss in the second quarter compared to the first quarter.”
It says its liquidity currently amounts to around €4.4 billion, noting it has taken financing measures worth €900 million to strengthen its position since March.
”However, in view of the business outlook, existing multi-billion liabilities related to trade payables and refunds of cancelled tickets as well as upcoming repayments of financial liabilities, the group expects a significant decline in liquidity in the coming weeks,” it adds.
“The group does not expect to be able to cover the resulting capital requirements with further borrowings on the market,” Lufthansa says. ”The group is therefore in intensive negotiations with the governments of its home countries regarding various financing instruments to sustainably secure the group’s solvency in the near future. The management board is confident that the talks will lead to a successful conclusion.”