Lufthansa targets costs, sets profit goal for travel restart

Lufthansa outlined ambitious plans to permanently boost profit coming out of the coronavirus crisis by slicing back on labor and overhead costs. Europe’s biggest airline aims to pare annual expenses by E3.5b to help it achieve adjusted earnings before interest and tax equal to at least 8% of sales by 2024, according to a statement. That’s a level it achieved just once in the five years preceding the pandemic. The new targets come as Lufthansa appoints banks to refinance state bailouts. More than half of the savings will be from staff cuts that have been announced but not yet fully implemented, with 10,000 jobs yet to go in Germany alone. The airline also plans to eliminate as much as 30% of office space, renegotiate supplier contracts and trim external consulting and marketing budgets. The plan should be taken with “an ounce of caution given the high dependency on labor-cost reduction,” said Daniel Roeska, an analyst at Bernstein, pointing to the challenge of getting labor unions to agree to cuts. Clarity will come only next year with union negotiations and possible forced dismissals, he said. The airline confirmed that Germany’s WSF stabilization fund, its biggest shareholder, may participate in a planned capital raise that will help refinance a E9b state bailout. People familiar with the matter said last month that it’s aiming to garner about E3b via a rights issue. WSF is considering selling some of its subscription rights and using proceeds to purchase new shares, according to the statement late Monday, a move that would free taxpayers from committing more cash while shrinking the government’s holding, albeit to a lesser degree than if it didn’t participate.<br/>