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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 (163)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Nick G says:

    I don’t know about anyone else but I’m itching to book somewhere again (when it’s safe to travel) since I’ve had two breaks cancelled. I don’t expect to get any money back on them since it was all flight and accommodation bookings separately.

    My personal demand will remain unchanged, but I can see how other people may be put off for a while. I think if airlines and hotels come back with competitive offers straight away then it will certainly increase confidence in travellers.

    • Dubious says:

      I agree and as evidenced by my inability to get time off work in August (return leg of booking made in 2019) because all my colleauges have shifted their disrupted April trips to the next available Public Holiday week!

      Some of us, who live abroad, need to return to the UK are intervals too, but currently not seeing acceptable flight prices to make forward bookings.

    • TGLoyalty says:

      Will be on the first flight I can get on.

    • Rich says:

      Refunding will depend upon the reason / timing of you cancellations. I left it until the FCO advised against all but essential travel (to Malaysia) and got every penny back from Malaysian Airlines (Business long haul and business internal), Shangri La in KL, Datai in Langkawi (booked via BA holidays), HEX and Chiltern Line to Paddington!! I booked everything independently myself rather than as a package or via an agent and the refunds took just one phone call or email each. All the monies have come through already (we should actually be in Langkawi now still) and no one tried to palm me off with a voucher at any point.
      Go ahead and claim – what is there to lose? There’s always your travel insurance as a last ditch, but if you have the Centurion cover you may be pleasantly surprised.

    • Mr(s) Entitled says:

      Any money I get back now for cancelled trips goes straight into the pot for rebook at the earliest opportunity. To limit the economic impact there is an imperative for those that can to spend again. Apparently society does now exist and we all have a role to play.

  • Dubious says:

    You are quite particular about your particular “with BA particularly *particularly* dependent on the US”.

    I get the fleet reductions and ability to grown once demand comes back but – I do wonder how easy it will be to grow the number of staff needed to maintain and fly the future fleet if they downsize the fleet today and these people are also lost.

  • DS says:

    Willie Walsh has already said that they will retire “BA’s B747s, Iberia’s A340s,
    some of Aer Lingus’ A330 and possibly 20 narrowbody aircraft.”

    • memesweeper says:

      Walsh “underlined that the thirty-one B747-400s operated by British Airways and the sixteen A340-600s flying for Iberia are all fully depreciated and will be the first to leave the fleet.”

      That’s not to say they will, but they are definitely at the front of the queue. Glad I got my 747 ‘nose’ bucket list journey in last year.

      • TGLoyalty says:

        No idea why being “fully depreciated” or not makes any difference to cashflow and operating margin (EBITDA) which are the two things any business should be focusing on right now

        • memesweeper says:

          Maybe, but in my experience it’s never easy to get a firm to write off or sell and asset when it still has book value.

        • Lady London says:

          I guess it means they are losing the maintenance expenses on older planes if they take them out of service which helps operating profit.

  • Olly says:

    Surely the loss of Heathrow slots would be a major factor as to why BA wouldn’t reduce its fleet in such a similar manner (this does if course assume that there is sufficient demand from the other airlines to pick these slots up)

    • memesweeper says:

      That’s why a withdrawal from Gatwick would make some sense. The slots there are far less valuable. It’s mainly O&D traffic and would translate well to the way BA has operated T3 LHR in the past.

  • Cheshire Pete says:

    When the Headline said “slashes” I wasn’t expecting to see just a 10% “marginal” reduction……

    • Frenske says:

      I briefly thought I landed on the Daily Mail page.

      • LetBAgonesbe says:

        Rob, I feel you changed your writing style to make it look more “sensational” and less factual.


        • Marcw says:

          More site views…

        • Rob says:

          I will tweak it.

        • Doug M says:

          Rhys wrote it I’m sure. They clearly have a different writing style. Given his age it’s not unexpected. I prefer Rob’s but then I’m older. So long as I can understand the item I’m happy.

          • Rhys says:

            Rob wrote the headline 🙂

          • Rob says:

            I did. It is possible that, subconsciously, I use a different style for headlines on articles by Rhys than I do for my own. I already have to do this when editing articles so you can’t see the join.

    • Gavin says:

      I also thought “slashes” seemed misleading when I read it was only about 10%

      • Colin MacKinnon says:

        Could always use decimate – always sounds worse than 10% !

        • The Savage Squirrel says:

          Like decimate – factually very precise but sounds spectacular!

  • J says:

    Or when things eventually get back to normal there could be a quick recovery and significant growth. Nobody really knows.

    • Kev 85 says:

      “ there could be a quick recovery and significant growth”

      What % of travel is accounted for by business travel? Not many businesses are going to allow travel for the foreseeable future.

      • J says:

        Based on what? Businesses will allow travel when it’s safe and the government advice shifts. Video conferencing isn’t a substitute for face to face meetings – there will be demand.

        • Mr(s) Entitled says:

          True but a lot more people may be forced to turn right when boarding.

        • Kev 85 says:

          “ Based on what?”

          Cost savings, given that so many have been impacted negatively by the lockdown etc

          • Kev 85 says:

            When GDP declines, air passenger numbers decline. The drop that’ll be reported for Q2 will be the worst in living memory. That’s not suddenly going to be reversed in July.

        • Roy says:

          Having been forced to switch from face-to-face meetings to video conferences, I doubt that all of those meetings will move back to face-to-face. Some will, but there will also be an increased realisation that, where there’s a will, video conferences can be used effectively.

          • Kev 85 says:

            “ where there’s a will, video conferences can be used effectively.”

            More importantly, where there’s an easy cost saving to be made.

          • Craig says:

            think it completely depends on the industry and/or the amount of money the client is paying for a meeting (if that is the case)

          • TGLoyalty says:

            i agree video calling can be useful but at the end of the day remote working will never replace hands on face to face meetings completely.

            Different industries have different requirements but I know my line of work its extremely difficult to do lots of the work that requires travel remotely (supplier audits etc)

          • Kev 85 says:

            “ I know my line of work its extremely difficult to do lots of the work that requires travel remotely (supplier audits etc)”

            Does it require international travel?

          • Andrew says:

            Won’t this all depend on what your competitor is doing?

            With all the tech in the world, the winner of any deal is still most likely the person who turns up and leaves a couple of tubs of M&S chocolate mini rolls in the staff kitchen.

          • Kev 85 says:

            “ With all the tech in the world, the winner of any deal is still most likely the person who turns up and leaves a couple of tubs of M&S chocolate mini rolls in the staff kitchen.”

            That sort of travel will likely continue (I don’t think anyone is suggesting that business travel will disappear entirely) but where I work a lot of business travel is internal meetings. Monthly meetings where people are travelling from Asia, America etc will likely become video conferences

  • Richard M says:

    Over at Easyjet, makes Stelios look more and more right, where is the sense in ordering a load of extra planes?

    • TGLoyalty says:

      He has his own agenda against buying Airbus planes.

    • Patrick C says:

      Much better strategy is improve pricing and delay deliveries. Both of these might be accomplished without paying any penalties. You get a cheap fleet renewal and much more efficient aircraft…

      Stelios’ idea is so dumb commercially that you wonder how he ever ended up a shareholder in an airline…

      • Mr(s) Entitled says:

        How do you know that your suggested strategy is not his end game? The guy deserves some credit.

      • Lady London says:

        Are you being a little un-serious?

        Stelios founded easyJet. Then had the good grace and sense – which is rare – to step aside and let professional management run it once it got going.

        He is from one of the Greek shipping families and those boys can fight at any level.

    • J says:

      Ryanair ordered 100 Boeing soon after 9/11. Easyjet haven’t been able to compete since on price and Ryanair overtook them in size a long time ago. I’d say Ryanair even forced Easyjet to change their business model, as Easyjet now don’t even try to compete with them on price but position themselves as a slightly “premium” LCC. O’Leary was right then with that huge order and a similar move today could pay off if there’s a decent recovery, or not if things turn out as bad as some fear.

  • letBAgonesbe says:

    I booked a trip to Alicante for last week of September.
    I also have a trip to Greece last week of June.

    I am not sure if any of those will go ahead but crossing my fingers.

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