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

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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

  1. The Lord says:

    What do we reckon, Q3 domestic travel/travel within Europe opens up? Q4 international routes return to some form of normality?

    • BA is still running some European flights even now. EHIC cards plus EU freedom of movement rules mean no insurance issues, no access issues and a decent healthcare system wherever you go so this could come back quickly. I anticipate we’ll end up in Spain / Portugal / Italy during July / August.

      Other countries are trickier – lack of insurance, potential ongoing rules re quarantine on arrival, lack of comfort in the local healthcare system etc. I am fairly confident so far that our October Middle East jaunt will happen but I am less sure I will get to the US this year. That said, if it was a 3-4 day trip I would be fairly confident I could get out of the country if I started falling ill and before the £5k per day health bill kicked in ….

      • Rob it is extremely irresponsible to suggest traveling whilst unwell (or starting to be unwell) in the current climate. I hope you would not travel whilst unwell (regardless of the cost/day), given you would likely infect many people whilst traveling.
        Many travel insurances will still cover health issues, just not cancellations due to coronavirus as this is now a known event.

        • jamie says:

          I don’t think he did

          • “ That said, if it was a 3-4 day trip I would be fairly confident I could get out of the country if I started falling ill and before the £5k per day health bill kicked in ….”
            Definitely suggested it as an option.

        • MattB says:

          Its pretty clear he meant get out if he fell ill whilst travelling

          • Kev 85 says:

            That’s still travelling whilst unwell and potentially infecting other people on the plane who could then infect their families etc

      • Sideshow bob says:

        EHIC cards are NOT a substitute for travel insurance! It will not get you home if you fall ill overseas.

        • I know. But no insurance you buy now will cover you for CV, and an EHIC card giving you free local treatment is a lot more attractive than finding yourself having to pay a private hospital elsewhere, especially the US.

          • Sideshow bob says:

            Not quite right by you.

            Some insurers are still providing coronavirus medical cover (not travel disruption). E.g. AXA.

          • ChrisC says:

            EHIC does not give you free treatment. It gives you the same treatment as a national of the country you are visiting.

            If you have to pay to visit a doctor, for an x-ray, drugs etc as a local then you pay them even with an EHIC.

            https://www.nhs.uk/using-the-nhs/healthcare-abroad/apply-for-a-free-ehic-european-health-insurance-card/

            “In some countries, patients are expected to directly contribute a percentage towards the cost of their state-provided treatment. This is known as a patient co-payment.

            If you receive treatment under this type of healthcare system, you’re expected to pay the same co-payment charge as a patient from that country.”

          • Lady London says:

            Didn’t someone say the Amex Plat insurance still includes CV? So would you be ok for a trip to US?

          • Amex has said it will pay, although the policy is very weak on these things.

      • Nick G says:

        Rob

        Try the Conrad algarve. Cracking hotel

    • Kev 85 says:

      I think domestic holidays will be reasonably popular for the rest of this year (once lockdowns are eased/scaled back etc)

      • Fenny says:

        Seems like I’m going to be holidaying on my allotment this year. If I can’t get anything to plant on it, I’ll have loads of time for sunbathing.

    • Bagoly says:

      I cannot see the hospitality business, let alone airlines, starting to return to normal until there is one of:
      a) an effective vaccine
      b) an effective drug treatment
      c) an antibody test to show that one has had it, even if without symptoms, or will never get it.
      d) almost everybody has had it

      If the number of people with inherent resistance is say 50%, then governments will presumably want to keep death rate down by continued lockdown – in the UK to say 1000 per day, which suggests (60M * 50% * 1% ) / 500 = 300 days.
      Vaccine time seems to be guessed at 360-540 days.
      Drug treatment – who knows – we have never found anything reliable for ‘flu but biology has advanced enormously in recent decades and everybody really wants it.
      Antibody test – seems most likely to happen soonest, but how well will countries accept paperwork from other countries for it?

      If none of a, b, or c happen, then what will be very interesting is what happens when d) has been reached in some countries but not others.
      This would seem most likely to happen in poor countries, who could be “done” in three months but at the cost of some pretty grim short-term scenes.

  2. Peter K says:

    If they have the money I think a lot of casual consumers will go flying again for holidays. Many had their Thomas Cook hols cancelled, then their hols cancelled by coronavirus, plus having to stay indoors. They’ll be desperate to get away.

    • Insurance is key though. EHIC would cover European trips (for now) but would you go to the US knowing you were uninsured against coranavirus?

      • james says:

        I’m looking at using VA miles for a trip to US in October, if things aren’t back to reasonable normal by then we are gonna be in bigger trouble than the virus is causing.

        Humans have a propensity to slip back into old ways quite quickly, all this talk of a new normal is deluded, 9/11 is an example that you would have expected to affect air travel more, but other than still having to put your toiletries in a clear plastic bag for some reason?….

        • The Lord says:

          Agreed, also booked for early Oct to US. Fingers crossed

        • It took 3 years for passenger numbers to return to pre-9/11 levels. Maybe not a “new normal”, but it had quite an effect. I actually see the impact here being larger for a number of reasons which I can dig into if people are interested.

          • I agree that people will bounce back to the old ways eventually, once allowed. We won’t see a permanent lack of international tourism. Just pointing out that people did stop travelling after 9/11.

    • Paul Pogba says:

      Lots of casual travellers will be losing their jobs (or facing pay cuts) so more than one holiday a year will be a thing of the past for many for the foreseeable future. I’m also fairly convinced many countries will sacrifice their tourism industry to preserve the rest of the economy and keep the borders shut too.

      What people want and what they’ll get are two different things.

      • Shutting your borders doesn’t work though, unless you believe the rate of infection in other countries is higher than in your own. It is a political gesture. I can see a stage where you might have to do a finger-prick blood test at Heathrow to get a stamp to allow you to travel, however.

        • Kev 85 says:

          “ It is a political gesture”

          Those have become more common in recent years haven’t they?

        • Mikeact says:

          So, you’d have to get to the airport even earlier for your pin prick?.
          Maybe your inoculation record wil have to be brought back as part of passport / travel requirements…..mine still shows the many shots I’ve had for various horrible things over the years.

          • It can be easily implemented internationally through the existing system of yellow cards. I can even see this being done at Boots in the same way you get yellow fever inoculation. No need to do it at the airport.

      • TGLoyalty says:

        The economies of many countries rely on international trade.

        This virus is NOT going away

        • Of course it is not going away, we have many many strains of corona virus in our bodies. We will adapt and move on as we have with others like SARS and H5N1. Funny how everyone has become a health and medical expert on these travel forums.

  3. I think a lot will depend on what happens to Virgin Atlantic. If it disappears, BA will benefit and may get away with retaining most of its capacity.

    If not, they will still want to protect the Heathrow slots whether that means movement of services from Gatwick or the reintroduction of slot sitting short haul services. If the latter the short haul fleet numbers would need to increase in the short term, with a likely slow down in A319 retirements.

  4. Dermot says:

    What effect will all this have on prices? Will a reduction in competition lead to higher prices, or will over capacity and low demand lead to price reductions?

    I’m no economist and I appreciate there are large degrees of uncertainty, but does anyone have view?

  5. southlondonphil says:

    Germanwings will shut (or be shut down)

    ‘Shutter’ as a verb is a nasty Americanism that has no place in ‘proper’ English

    • Paul Pogba says:

      When the BBC has adopted Americanism like morgue (mortuary), apartment (flat), truck (lorry) there probably isn’t much hope for our own vocabulary.

      • RussellH says:

        Apartment is (or was) a perfectly good Scots word in the 1980s at least, albeit with a very different meaning from the American.
        I bought a three apartment flat in 1981 – ie a living room and 2 bedrooms, plus kitchen + bathroom.
        Someone else will have to advise as to whether this usage is still current!
        As to truck/lorry, here we call them wagons.

        • Andrew says:

          Definitely used in Scotland from the 18th century onwards to refer to rooms within a tenement block. Depending on where you lived, until quite recently, villas for sale tended to have the phrase describing the number of main rooms as “apartments”.

          Everytime someone whines about “Americanisms” it’s easy to enough to find a source where the term was used in the 17th-19th century in the UK.

  6. I’m not sure it’ll take years to go back to normal. And frankly I can’t wait to go back flying again, especially with part of my family in Italy…

  7. Is this old rule that certain long haul routes (going primarily over water) can only be flown by 4-engine aircraft? Could airlines be affected if they retire their 747s and 340s too soon?

    • Doug M says:

      ETOPS. Most modern two engine planes can fly huge spans of water, think pacific. I think the A350 was introduced with a 370 rating, meaning need to be 370 minutes from a diversion airport, suggesting happy to fly for over 6 hours on one engine.

    • The reason the 777 became such a successful aircraft in the late 90s/early 00s is because restrictions on twin-engine aircraft are now lifted. These days some of the longest routes are operated by twinjets (777, A350, 787)

  8. There’s a global pandemic that’s being slowed by stopping people from leaving their homes unless necessary.

    I can’t see any leisure travel being permitted while that situation continues. If we all go out and behave as we did, we pretty much reset back to start of March unless it’s discovered that a significant portion of society had it and now has immunity.
    2021 best case for holidays is my take. This isn’t going to go away on its own and it takes 1 infected person to kick it all off, across the world there are many more than that.

  9. Dwadda says:

    It wasn’t until 2013 that air travel returned to 2007 levels after the GFC. This is much much worse. Passengers may be tested before being allowed to fly in the future. Prices will remain high. Deglobalisation is a thing, not least because in a world that is too efficient there is no room for people. The drivers behind Brexit and Trump remain. The world is unlikely to be as it was.

    • jamesj says:

      “The drivers behind Brexit and Trump remain”

      What’s that then, idiocy? Petty nationalism?

      • In the extreme yes.

        For many moderate people it’s things like not supporting Chinese eating raw animals and spreading a deadly virus around the world, as well as a host of other things like undermining IP and dumping steel.

        Likewise for the EU Coronavirus was a chance for it to show how a single political and economic bloc could move decisively in a crisis, to which it has not risen to the challenge.

        Wherever you sit on the political spectrum if you think idiocy and nationalism hold enough of the middle ground to gain a majority I would suggest you are misguided.

      • mvcvz says:

        No. Sovereignty and a desperate need for change.

      • Bet you are surprised to see so many Brits working in the NHS now its on the new in front of your eyes?
        Want to deny that less than 5% are from the EU? and that’s including Ireland.

        So clinical about 2.5% Doesn’t fit your agenda?

        Oh well, back to the BBC for you for some fake new, migrant, refugee, immigrant – all the same to you uneducated.

        • Kev 85 says:

          What *ARE* you talking about Bazza?

          Apologies if you’re replying to a post which has since been deleted.

        • Exactly.
          Someone posted a picture of Facebook of 7 NHS workers holding up their country of birth. It was 6 EU and 1 UK.

          I ran the numbers on that and assuming a random distribution the chances of finding that mix of UK/EU people at random was 1 in 33 million.

          Far more non EU nationals work in the NHS than EU nationals.

          Back to sanity, I’m not sure many were up for banning EU migration to the UK entirely, I can only speak for myself but in terms of migration I vote for being able to hold someone accountable for UK immigration policy.

          • In terms of doctors, most non-EEA born ones become British citizens after 6-7 years.

        • Kev 85 says:

          6% is not less than 5%.

          Hope that helps.

  10. Balazs Spigut says:

    I need to book tickets with Iberia and Wizzair for my parents to fly to Alicante end of September. They only have a debit card.
    I am a bit worried. They wouldn’t have a protection in case the airline goes bankrupt (less worried about Wizzair).

    Would it be safer if we book via Expedia?
    Would it be safer if we pay via Paypal (for the Ibera ticket)

    • If you’ve learn anything in recent weeks it should be that booking via an agent is a recipe for disaster.

      Wizz has more money than anyone if you go back to my chart the other day of cash in bank vs current bookings.

      PayPal gives you a bit more leeway.

      • letBAgonesbe says:

        Thanks Rob!
        I just found a much better deal if they fly with TAP Portugal. It includes one change but cost 30% less.
        Would you consider TAP relatively safe to book.
        I know you don’t have a crystal ball but…

        • TAP is the worst airline in Europe for not refunding at the moment. I would have some concerns over stability given it has replaced its entire long haul fleet in the last year or so and was only privatised fairly recently.

          • philco says:

            You aren’t kidding I have done nearly a dozen refunds since this all kicked off starting in late February. TAP has been the worst to deal with. I proactively cancelled some refundable J tickets and made it in before the re-engineered their refunds website to only let you select vouchers. My refund requests been waiting a “review” for 3.5 weeks and counting.

    • roberto says:

      Do you have a credit card? Pay on that ..

      • Nick_C says:

        My understanding is that if you buy air tickets on behalf of your parents with a credit card, and you are not travelling with them, S75 does not apply.

        If it is a gift and your parents are not paying you for tickets, it may apply.

        According to The Mail (and they are normally good on personal finance), S75 does not apply
        “Where the customer is paying for something for someone else and the contract with the merchant is not with the cardholder;”

        https://www.thisismoney.co.uk/money/experts/article-7588047/Why-use-Section-75-make-claim-using-party.html

        • Nick G says:

          I’m waiting for a s.75 claim on flights with easyJet and Jet2 following the cancellation of the Geneva motor show. I booked using Amex gold. To be honest I almost didn’t bother as the flights were technically still running, and WHO advice hadn’t kicked in then.

          I’ll see if I ever get any money back. I doubt it and not that I can afford to throw money away in the grand scheme of things it’s minor.

        • Section 75 doesn’t apply when the card is used for someone else, but you still need to receive what you paid for. Section 75 would mean that the card provider is liable for a replacement flight. If it doesn’t apply then you can only get a refund.

      • Nick_C says:

        And each ticket needs to cost more than £100, so avoid LCCs that don’t sell return tickets if you want S75 protection.

        Balazs Spigut, why not not get your parents to apply for a credit card? Pensioners usually qualify.

        • Nick G says:

          Not true. It’s the overall claim value that has to be over £100. My example was flights booked with 2 airlines for 2 single flights total cost £150. Amex have confirmed I have a case to investigate as it is over the £100 threshold

          • You/Amex are wrong, previous post is right. If Amex do pay out they’re (intentionally or unintentionally) going beyond what the law requires.

    • Lady London says:

      Why can’t you protect them by using your own credit card to make the booking?

      • Lady London says:

        * Answered by poster above it would have to be a gift not paid on behalf of.

        • Charlieface says:

          Not strictly true. The main cardholder has to benefit in some way, so if it’s bringing in close family for holiday then yes, paying them to go away probably not (if it’s in-laws definitely yes 🙂 )

  11. Since this shutdown is unprecedented – nobody knows how quickly demand will rebound (once the restrictions are lifted).

    The advantage for BA is that with their B747s fully depreciated, there is little cost in wrapping them up in Teruel and waiting. If demand returns, then off come the covers and you have capacity to make money. If it doesn’t, then they haven’t lost much by delaying the wrecking ball.

    Lufthansa could look pretty short sighted if demand does return relatively quickly and they don’t have the aircraft available to take make the most of it.

    • Doug M says:

      Except if you’re not flying them you have no pilots qualified to fly them.

    • ChrisC says:

      thereare a lot of costs in parking a plane – even if it is wrapped up. It’s not a cheap option at all in the long term

      There are parking fees to pay the airport you park them at. Daily rate might be cheap but after a couple of weeks or months they soon mount up.

      They still need checking up on – again at a cost

      And they need moving at regular intervals – even if by a tug at a cost – otherwise the wheels ‘melt’ into the concrete / tarmac they are parked on.

    • Lady London says:

      What’s Teruel and does it really stop them deteriorating?

      Aren’t spare planes parked in places like the Arizona desert? Apparently the dryness there preserves them?

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