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Lufthansa CEO thinks long haul markets will reopen with rapid testing before Christmas

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On Friday, Lufthansa CEO Carsten Spohr gave the final keynote interview at the World Aviation Festival, discussing his views on the outlook for aviation in the coming months and years.

I listened in to see what he had to say.

Lufthansa A380

What’s happening with Lufthansa’s fleet?

Changes to the Lufthansa fleet have been ongoing since the realisation in April that Covid-19 was here to stay. Almost six months ago, Lufthansa slashed its fleet, ditching a number of its older A340 and 747 aircraft.

Since then, Lufthansa has announced it is mothballing its remaining A340s and A380s. This leaves their future open although its difficult to remain optimistic given early retirements of these aircraft by other airlines.

Lufthansa hopes to cut its fleet by around 150 aircraft across its airlines, which include SWISS, Austrian and Brussels Airlines, from its 2019 peak of 800.

As a rule of thumb, each aircraft retirement affects around 100 jobs at the airline.

Two thirds of the fleet is currently grounded and Lufthansa expects around half to remain grounded going into 2021.

Lufthansa has chosen to retain its 747-8i – the latest generation 747 aircraft – as it positions it as its current flagship. The lower passenger capacity but increased cargo capability means it is far more versatile at the moment.

The future of the loyalty program

There was some discussion over the future ownership of Lufthansa’s Miles & More loyalty programme, given the continued need for funding. (Despite receiving a €9 billion bailout from the German Government, Lufthansa is still seen as vulnerable given its current cash burn rate.)

Spohr is clear that Miles & More isn’t going anywhere. It is “just not for sale” and a “key enabler of customer relationships”.

He pointed out that Air Canada has just brought its loyalty programme, Aeroplan, back in house.

(It is also fair to say that Aeroplan killed off any opportunity for other airlines to monetise their loyalty programmes. As soon as the initial contract between the airline and Aeroplan ran out, Air Canada announced that it was launching its own programme. The value of Aeroplan collapsed to, give or take, nothing and Air Canada was able to buy it back for peanuts.)

Heathrow Covid-19 testing

Covid testing

Lufthansa is pushing airport and airline testing of passengers very, very hard. Spohr is a “strong believer in testing being a game changer for this industry.”

In the past months Lufthansa has been offering PCR swab tests at both Frankfurt and Munich, allowing arriving passengers to get tested.

It wants to take this one step further and announced this week that it is rolling out free rapid antigen testing to its premium passengers.

Existing PCR testing is slow and expensive, with results taking hours. The new antigen tests are much faster – just fifteen minutes – and significantly cheaper at 5 to 7 Euros.

The only drawback is the accuracy, which is marginally lower than a full PCR test.

Nonetheless, Spohr considers widespread testing “just weeks away” at Lufthansa and the only way to “reopen global skies” in the immediate future. From the sounds of it, Lufthansa is pushing to offer solutions to the current situation rather than waiting for a potential vaccine to arrive.

“Without testing there will be no re-opening of the transatlantic in the short term future.” Much like British Airways, Lufthansa has been talking to US and German authorities to try and open up transatlantic flying by introducing these rapid tests. He expects antigen tests to be accepted by governments in October.

Lufthansa sees sufficient availability for these tests in the fourth quarter and hopes to re-open select long haul routes before Christmas, although “before we have a full fledged global network again including testing I think we’re looking way into the second quarter next year.”

Will business travel bounce back?

Spohr gave a remarkably bullish outlook on business travel, arguing that in the long term only around 10% to 15% of business travel will be replaced by digital tools such as Zoom or Teams.

However, he sees the long term trend away from business travel and into leisure and visiting friends and relatives continuing.

Will airlines go bust?

Spohr sees consolidation in the aviation industry as a “mega trend.”

“I see way too many players in Europe and I’m sure some of these will not survive.”

“I have been fairly critical to the blind growth of our industry for the last years.”

He predicts that the future will see more focussed and sustainable growth by airlines.

What does the future hold for Lufthansa?

Investment has not stopped at Lufthansa, although it is being pushed down from the record levels seen in 2017, 2018 and 2019.

Lufthansa will continue to renew its fleet with more efficient aircraft, and the new business class seat pictured above, due to debut on the 777X, is still going ahead.

Only time will tell if Spohr is being too bullish about the future.

Comments (80)

  • memesweeper says:

    I suspect the airlines, airports and tourism dependent countries would accept the ‘rough and ready’ test as good enough. I’d hope the UK government would go along with this too, with tests required to board UK bound craft. It’s not perfect, but it’s a start.

    Yes, an effective treatment or an effective vaccine would be fabulous, but both are not known to exist yet. We can’t solely pin on hopes on that.

  • Doc says:

    It’s easy to be critical of the blind growth of the industry when your government keeps putting money into your bank account every time you are in trouble.

    • Doug M says:

      Exactly. The quotes are laughable coming from the head of an airline that was insolvent 5 minutes into the pandemic.

      • Lady London says:

        …and that has been amongst the very worst for not refunding people.

        “Refunds Department is closed” was reportedly their statement. Against all their stated rules on tickets sold. Quite apart from any German or EU legislation that customers should get their money back for services paid for but not provided. Seems most un-modern Germany. Seems more old East German way or even Russian.

        Was the bear in Germany only sleeping these past many decades but always still there?

        • Doug M says:

          German gov amongst those lobbying EU for a temporary rule change/suspension. I’m sure that just further emboldened LH to ignore law.

  • Mike says:

    I think the thinking here is a bit broken, a test regime implies people are worried about quarantines, I suspect a lot of people aren’t traveling because they don’t want to catch Coronavirus. I’d love to know which is the biggest factor in the reduction in travel (obviously excluding country bans).

    • John says:

      The biggest factor is probably the fact that people are not able to enter most countries

      • John says:

        100% this for me.

        In my 60s, I’m not worried about catching it travelling. Whatever years I have left I want to be enjoying them, not wasting them stuck at home with restaurants, shops, museums, entertainment etc. shut down, the weather grim and the economy dying.

      • John says:

        Heh, just noticed we’re both John.

        I was was replying to John 10:43, not to myself 🙂

    • GaryC says:

      I think there are a number of factors at play here preventing travel. Speaking personally, they roughly order:
      1) Inability to enter a country at all – for example I’d typically travel to the US 6-10 times per year, half of these for leisure.
      2) Future travel being simply too uncertain, with the ever-changing landscape of entry requirements, quarantines, lockdowns and subsequent FCO advice. I’d normally take 1-2 European weekend breaks each month, but I don’t have the time or inclination for constant re-planning of where I can go. The uncertainty around Brexit and potentially having to rely on travel insurance for medical cover rather than reciprocal EU health cover doesn’t help.
      3) The risk of being quarantined and potentially getting sick away from home, particularly in countries with less good medical facilities which may be under strain. The longer the flight, the further from the UK and the lower my confidence in the country’s medical facilities, the higher the risk.

      Sum these up, and what does it mean? Since lockdown I’ve made 5 domestic trips and for the remainder of 2020 have a single trip to Stockholm booked in the BA sale as it looked one of the safer bets.

      • mr_jetlag says:

        same here – just checked, YTD last year I had taken more than 40 flights by September. This year I’ve taken 10 – and that’s counting 6 flights on one OTP-PHX run (sigh).

        • Lady London says:

          I’ve actually been struggling to arrange 3 necessary trips and I was willing to brave quarantine and – carefully – Covid risk.

          What’s taking me hours and days is flights disappearing. I have cancelled flights I am trying to rebook but no flights are running anymore, for whole runs of days, when I need them. I’m looking at 4 hotel nights for something I”d only need 0-1 for before, and flights only at either end of the day meaning yet another night in a hotel at the airport. Due to no transport that early or late due to flight timings of the only 2 or 3 flights still running each week (formerly 20).

          In despair I watched about 10 days as the moment the slot-sitting decision came out, flights literally dropped day by day out of British Airways”s schedule. Leaving the only travel available looking like a leisure weekend. Otherwise you would have toto stay a whole week.

          All services have now been able to increase the prices too as they can force those who need to travel onto the few services available.
          Miraculously, there are still 3 or 4 airlines operating my key route but why are they operating their flights at practically the same times ?all with the same weekend-only pattern – nothing midweek.

          I’ve had to abandon a 3rd trip because there is a flight that gets me there for the invited day, but it would take me another 2 or 3 days requiring 2 extra unwanted hotel nights, to get home as there are simply no flights that exist to get back.

          Other more cumbersome ways than flying, of getting home including trains, buses and cars would take 24-36 hours. I would consider them, but those operators have tsken the opportunity to also run very few services. Prices are through the roof.

          When you worked out how to frequent fly previously with the aid of sites like this, it was possible to choose to spend in a way that let you stroll on and off planes like buses and yet be ready for any eventuality.

          If this is the future of travel then I am going to change my travel pattern and lifestyle radically. ‘Loyalty’ will be out of reach for all but the very rich (or whose firms are rich) as before.

          • Anna says:

            You can shore up your immune defences. In Spain they have been trialling giving viatmin D supplements to hospital patients and it reduced ICU admissions to zero among the supplemented group. Elsewhere studies are showing that the likelihood of contracting the virus in the first place correlates directly to levels of vitamin D in the blood. I feel that having been taking it for 4 years already, together with hand washing/sanitising, a mask and as much social distancing as possible, I would be prepared to get on a plane now.

          • Novice says:

            @Anna, you are correct. According to all my research I sort of flagged Vitamin D as important a few months back and I’ve been taking a supplement since March. And, I haven’t had my usual September cold yet either. Also, cleaned up my diet more… I’ve not had junk food since April. I swap now nuts instead of crisps, dark chocolate instead of regular chocolate, a lot of fruit and MGO 300 honey…. I can tell you I’m in the minority who have lost a bit of weight instead of gaining in lockdown… I don’t think I have ever been this healthy and fit in my life as I’m lazy and my work is basically sitting down to write…

            It is ironic that in the middle of a pandemic I feel the healthiest ever…

    • TGLoyalty says:

      Honestly think people will travel as long as there’s no risk of quarantines for all and the countries are open for travel.

  • BJ says:

    You have to wonder what these people do to deserve their big fat pay cheques and benefits. Based on this article, Spohr said nothing more insightful than we could expect of a high school student in a debate on the subject. That he appears likely to believe in Santa Clause doesn’t help.

    • Lady London says:

      Santa Claus=the German government?

    • Novice says:

      @BJ, I reckon a high school student in a debate would actually be way better on any subject. Have you ever heard teens debating? My parents used to give up and still do if I start a debate on anything.

  • Nick_C says:

    Reminds me of Jo Swinson claiming she was going to form the next Government.

  • mr_jetlag says:

    It’s an industry conference speech. Having spoken / panelled / moderated at a few, the majority of keynotes are meant to reinforce whatever particular view that industry wants to push – eg “everything will be back to normal”. You will get the occasional “maverick” CEO claiming to “tell it like it is” (but in a way that benefits his particular firm) and sometimes they will even bring in academics or regulators for a balanced discussion that nevertheless reinforces the echo chamber (because people hear what they want to hear).

    Outside the aviation bubble, most people understand that long haul travel will be FAR more difficult and uncertain at least for the next couple of years until COVID vaccines have been properly distributed and even then, there will be occasional shutdowns in hotspot areas. Despite my best efforts for example I’ve had to cancel 3-4 longhaul flights – and that’s after lockdown proper – because of this long tail of disruption.

    • Lady London says:

      not just longhaul is prone to disruption and pretty imposdible to book even if you want to. I’ve bored everyone with my post above and that”s about how impossible it’s been to book flights on short-haul even if willing to travel or needing to. It’s not just longhaul.

    • James says:

      Benefits his particular firm? Not ‘hers’ or oven ‘their’? How enlightened. 🙃

      • James says:

        *even

      • Charlieface says:

        The vast majority of CEOs are male, so that pronoun is just reflecting facts on the ground. He/she can be quite cumbersome using it the whole time. Furthermore, in many languages, including some dialects of English, one says “he” if unsure of the gender.

      • Nick_C says:

        His is singular. Their is plural.

        How ignorant 😉

  • Andrew K says:

    Anyone who’s had to use Teams and Zoom for any amount of time will know that for 90% of meetings it’s incredibly inefficient compared to meeting in person.
    Business travel will be important for a long time yet!

    • illuminatus says:

      They work just fine. I would say it’s the other way around – at best 10% of all meetings require meeting in person

      • Peter K says:

        I agree that zoom etc is absolutely no replacement for person to person meetings. You can get information across well enough from a lecture point of view, but the little interactions that happen before, after and during a meeting are missing. Break out rooms are no replacement.
        You also get zoom fatigue where it is harder to concentrate compared to an in person experience.
        I say this as someone that has had at least 4 zoom meetings a week for several months now.

        • Riccatti says:

          Which means we have to enhance the ability to concentrate at Zoom meetings and more skill at extracting the information from it / while working remotely.

          Not dropping Zoom completely and return to the old normal.

  • Riccatti says:

    Airlines have not enough appreciation about what is happening with remote working.

    It is not realistic to expect that business travel (hence premium-paying, price-insensitive customers) will only reduce by 10-15%. These are rosy dreams and does not show a CEO as a credible person at the helm of the largest German conglomerate.