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Lufthansa cuts fleet, says passengers won’t come back for YEARS. What could this mean for BA?

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Lufthansa Group, which includes Austrian Airlines, SWISS, Brussels Airlines, Eurowings and Germanwings, has decided that a permanent restructuring is necessary in order to meet the suppressed demand for air travel in the next few years.  The airline is currently flying just six long haul routes.

Crucially, it believes that it will take “years until the worldwide demand for air travel returns to pre-crisis levels.”  In order to ensure the company’s long term survival it has decided to undergo significant capacity reduction.

In total, Lufthansa Group is getting rid of over 70 aircraft.  At Lufthansa, six of its 14 A380s are being retired immediately. These were originally due to be returned to Airbus in 2022.

Lufthansa to retire six A380 aircraft

A further five Boeing 747-400s and seven A340-600s are also being removed from the fleet.  This equates to a 10% capacity reduction in long-haul flying for Lufthansa itself.

The airline is shedding its most inefficient aircraft first – older A340s (on average 14 years old) and Boeing 747s (with an average age of 21 years), both of which are four engined aircraft.  Its fleet of fuel efficient A350s is unaffected.

11 A320 short haul aircraft will also be removed, accounting for just over 5% of the A320 fleet.

Lufthansa Cityline is withdrawing three A340-300s from service whilst the Eurowings fleet will reduce by 10 A320s.  SWISS will be delaying the arrival of its new aircraft orders.

A further 30 wet-leased aircraft will be returned to lessors. Germanwings, which previously flew 15 short haul aircraft for Eurowings, will be shuttered completely.

Should British Ariways cut capacity sharply after coronavirus?

What does this mean for British Airways?

With a combined fleet of 763 aircraft, Lufthansa Group is larger than British Airways owner IAG, which has a fleet of 570.  Lufthansa is also the first of the three large European airline groups to announce permanent changes to its fleet.

It is highly likely that we will see both IAG and Air France KLM follow suit.

If IAG follows Lufthansa’s 10% capacity reduction we can expect it to shed around 55 aircraft across BA, Iberia, Aer Lingus, LEVEL and Vueling.  The obvious thing to do is remove old and inefficient aircraft from the fleet.  Whilst fuel prices are currently low, masking their inefficiency, this is unlikely to be a long term benefit.  Older aircraft also require additional maintenance.

At British Airways, the obvious move is to bring forward the retirement of the Boeing 747 fleet.  Originally due to be retired by 2024, the average age of the fleet is 23 years.  These aircraft are fully depreciated.

At Iberia, the same can be said for its A340 fleet. Although younger than BA’s Boeing 747s, the A340s are inefficient with their four engines.

Short haul is easier to trim as you are looking at a focused fleet of A319, A320 and A321 aircraft which can easily be picked up by other airlines.  British Airways is currently in the midst of a steady fleet renewal program.  By ditching a greater number of older aircraft today than originally planned it can quickly reduce the fleet in the short term in the knowledge that a steady stream of new aircraft are on order to rebuild it in a few years’ time.

What about IAG’s Boeing 737MAX order?

You may remember IAG’s surprise Boeing 737MAX order last year in the midst of the MAX crisis. The ‘letter of intent’ (not, legally, a firm order) was for 200 aircraft with delivery slots from 2023-2027.

Whilst it wasn’t clear at the time whether IAG actually intended to turn these options into firm orders or simply use it to negotiate with Airbus, the future of this order is clearly uncertain.

Having said that, 2023 is far enough away that (touch wood) air travel will have rebounded to its pre-pandemic levels.  By reducing the fleet in the short term IAG may actually be in need of these aircraft.

For the very brave, there is another game to be played.  There are 400 Boeing 737MAX aircraft sitting, finished.  A large proportion of these will now never be delivered to their original customer.  A savvy operator – admittedly more likely to be Ryanair than IAG – could offer to buy 100 for, say, $25 million each and retire an equivalent number of older aircraft.  It would be a transformative deal if the capacity could be used.

Will British Airways ever return to Heathrow Terminal 3?

Fewer aircraft means fewer flights and less of a need for additional airport capacity.  Whilst British Airways was running a significant number of flights from both Heathrow Terminal 3 and Gatwick, we might see it pull out completely of one or the other.

The obvious choice is to withdraw from Heathrow Terminal 3 and consolidate at Terminal 5, enabling improved connections for all flights. However, there have also been rumours of American Airlines moving in to Terminal 5 with British Airways.  It is unlikely that BA will cut capacity so far that both of these things could happen.

Gatwick is a different story.  British Airways currently has 14 Boeing 777 based at Gatwick in a denser, less premium-heavy configuration. As these aircraft have all been recently refurbished (albeit with the legacy Club World seat and not Club Suite) we are unlikely to see any of these aircraft retire early.

We might, however, see some move over to Heathrow. BA’s operations at Gatwick are far less reliant on business travel and are dependent on the pick-up of leisure traffic.

It is impossible to predict how quickly people will start booking travel again but if there is a significant reduction in holiday bookings we can expect fewer flights from Gatwick.

The future is uncertain

We are currently in uncertain times. Nobody knows when travel restrictions will be lifted or how passengers will respond once we are free to fly again.  Even if passengers want to fly, we don’t know how quickly countries will start accepting tourists again – with BA particularly dependent on the US.  The refusal of travel insurers to cover coronavirus could also keep many people at home.

Lufthansa thinks it will take years for air traffic to peak again.  It’s not clear whether British Airways agrees, but if it does we are likely to see some aggressive reshaping of its fleet.

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Comments (164)

  • ChrisBCN says:

    I don’t understand why you ask the question ‘Will British Airways ever return to Heathrow Terminal 3?’

    Prior to all this, T5 was full, hence the use of T3. When things recover, T3 will still be needed, especially if AA move into T5 (T3 will be needed even MORE then).

    Your question seems to presume travel won’t bounce back for the foreseeable future – air travel has ALWAYS bounced back, this time won’t be any different. The mix of leisure to business may vary a little though.

    • ChrisC says:

      I don’t see AA moving to T5 in the short to medium term.

      BA will want to consolidate it’s operations in T5 first – to save a shed load of duplicate costs at T3.

      I hope they don’t shutter LGW though. LHR is a right palava for a lot of people to get to. I go to AMS 4-5 times a year all from LGW. If they stop that then I’m more likely to take Eurostar than go to LHR

      • ChrisBCN says:

        There isn’t enough room at T5 to include all the T3 flights, even before AA.

        • ChrisC says:

          there will be in the short term whilst there is less demand for flying

          And there would be if the extension to T5C ever gets build

          And there would be room for AA if T5D got built

          but those are unlikely for a long time

          • ADS says:

            may Heathrow Airport Limited will use the current stoppage to build T5C – it would be so much quicker and cheaper to build without having a busy airport operating around the diggers !

  • ChrisBCN says:

    Gatwick is a more interesting discussion though – as you say it’s more leisure focussed. Plus don’t forget it’s defensive role to compete against long haul price focussed competitors like Norwegian.

    There is an argument to replace BA at Gatwick with LEVEL. A lower cost base to provide the same services as BA would be beneficial to IAG, although there is an unknown impact on booking levels with the switch in brand. LEVEL would take over both long and short haul, both things they currently operate elsewhere.

    • Lady London says:

      Your idea of running LEVEL out of lgw and pulling the BA brand back to LHR/LCY is good. Gatwick has always seemed a bit treated like 2nd class except Barbados route.

      Putting LEVEL at Gatwick might also work well with easyJet there.

  • Spaghetti Town says:

    BA still have slots to fill at Heathrow otherwise they’ll lose them. It makes it a lot harder to get rid of aircraft.

    And the London market will be one of the first to recover, because well, it’s London. A world city.

    • Stu R says:

      London *was* a world city until sometime around 3½ years ago. Moving on, I think aviation will recover quickly – when/if this thing is over, you won’t be able to get:
      – a haircut
      – a restaurant booking
      – a dentist appointment
      – an optician appointment
      – a cheap flight / holiday
      for months … the demand for all will be unprecedented I believe

      • Lady London says:

        Tick, tick and tick. I am on lockdown with a rumbling tooth abcess. Really not wanting to risk travelling to dentist (he’s quite a way away) but knowing that leaving it may make it even riskier if I have to do it either side of the peak.

        Yup optician got cancelled. And don’t even talk about the state of my hair.

        My MOT got extended 6 months. But the guy who looks after my car is fantastic and MOT is a lot of his business. I can’t work out if he’d be insulted if I offer to pay him ahead the normal size of bill now in case he’s struggling. I’m not wealthy and he knows it but thinking if we all share a little and help each other through this- and it’s money I would have to put aside anyway. Ditto my hairdresser who just moved into her house but her partner lost his job shortly before CV. I just don’t know if they would be insulted if I offer to pay them ahead. Any government support money looks like it won’t be paid to the self employed before late June.

        • Anna says:

          Thankfully Morrison’s brought L’Oreal home hair dye with my groceries!
          I am continuing to pay my cleaner and told her not to worry about it as god knows when self-employed people will get anything from the government.

        • Liz says:

          Our MOT is due this month and we had already booked our car in to our local garage before the 6 mth extension was offered but decided to go ahead with the service and MOT to support our local business. Posted keys through the door, paid over the phone, keys in car on collection.
          Daughter is working from home but her boyfriend is a self employed DJ – their landlord is letting them pay 75% rent for next 3 mths – they don’t need to pay the 25% back – so we will help them out over the next few months so they don’t get in to debt.

      • Spaghetti Town says:

        London is the capital of Europe and will continue to be so.

        • Stu R says:

          You keep telling yourself that, however I’m calling bullsh**! London is/was the European financial capital, but the FT predicts this will soon quickly be overtaken by Paris. The effects of the act of national self harm in firing the gun at BOTH feet in Jun 2016 haven’t even started to be felt yet. In the meantime, I’ve found myself apologising for my nationality when I hand over my passport in European hotels ever since!

          • Anna says:

            France isn’t doing so well just now, and don’t even mention Spain, Italy and Greece. Selfish though it may be, we are well out of the EU at this point.

          • Anna says:

            That’s not a reference to COVID-19 incidentally, but to the way in which those countries have managed their economies for decades.

          • Alex W says:

            If you think the UK will be better off than those countries you’re in for a shock.

          • ChrisBCN says:

            I don’t know why people continually think the UK is the best country in the world in every way 😂 open your eyes!

          • will says:

            It’s certainly not the best country in the world in every way but I don’t think trust, law and order and genuine freedom from restrictive government intervention as well as corruption exist here like they exist in Italy, Spain and France let alone A8 countries.

            The EU is far less important than both sides of the argument like to think.

        • J says:

          The damage coronavirus is doing to the economy coupled with a hard brexit and I think there are very tough times ahead. I’m relieved I left for Germany but obviously worry for everyone there.

          • Spaghetti Town says:

            @ChrisBCN

            Nothing wrong with loving your country. There’s many things to celebrate in Britain. Whatever country you move too will have it’s drawbacks.

      • mark2 says:

        And dog grooming; our Blue Roan Cocker Spaniel looks like a mutt!

        • Dr Doom says:

          Dog grooming services can still operate legally, so no problem there

          • Rob says:

            A friend of mine wanted his BBQ cleaning company to come out but apparently they do not believe they are an ‘essential service’. He disagrees!

          • Anna says:

            On the other side of the pond they are having that argument about pool cleaners!

  • Giles Wastell says:

    I thought Covid had moved us on from toxic polarised Brexit debate.
    Come the re-bound, London, like all other world cities, will recover and whichever rises to pre-eminence is currently pure conjecture.
    Let’s move on & overcome the current crisis.

  • Vincent Paul Shanley says:

    Good, informative post. I didn’t realise LH had a bigger fleet than BA..

  • zayn says:

    100% agree with LH , no insurance will be covering your flight risk to covid-19 , if you take the flight become infected probably pass it on to fellow passengers. Flight risk is still going be at 100% until covid-19 cure and a compulsory vaccination certificate for flying is in place