Lufthansa Talking With Planemakers on Switch to Smaller Jets

(Bloomberg) -- Deutsche Lufthansa AG is in talks with planemakers about swapping some orders for larger aircraft to smaller long-distance models, helping to adapt its fleet to an enduring slump in intercontinental business travel as the coronavirus crisis upends demand.

Europe’s largest airline group is in negotiations with Airbus SE and Boeing Co. about existing orders, with the manufacturers showing flexibility in the discussions, Chief Executive Officer Carsten Spohr said in a webinar Monday as part of the London School of Economics German Symposium.

Spohr didn’t elaborate on the potential changes. He said he doubted whether demand for business travel in Europe and the U.S. will ever return to pre-pandemic levels. Lufthansa previously said it was in talks about its plane backlog, without detailing its goals.

Planemakers have slashed production as airlines review their fleet needs while granting leeway over deliveries to help minimize cancellations. Airbus said last month there’ll be no increase in build rates for its newest A350 wide-body this year, while Boeing is at risk of losing more than a third of orders for the coming 777X as delays give customers the right to walk away from contracts.

Shares of Lufthansa traded 0.4% lower as of 9:06 a.m. in Frankfurt. The stock has added 1.4% this year after losing one-third of its value in 2020.

The German company has orders for 20 777Xs and 41 Airbus A350-900s. Some 777 buyers are looking to seize on the program delays to switch to smaller 787 Dreamliners, of which Lufthansa already has 20 on order. Airbus offers the A330neo as a smaller wide-body as well as new, longer-range versions of its single-aisle A321neo.

Representatives of Boeing and Airbus declined to comment.

Lufthansa has already moved to stand down many of its thirstiest four-engine wide-bodies, saying last year it would retire the last Boeing 747-400s and that eight A380 superjumbos would only be reactivated in the event of a sharp market recovery.

“We are putting many four-engined long-range aircraft out of the fleet and this creates a certain need for smaller long-range aircraft,” said Spohr “These are very dynamic discussions.”

The CEO also said the airline is in fleet talks with Embraer SA, whose regional planes are operated at Lufthansa, Austrian and Air Dolomiti and compete with the Airbus A220 used by Swiss. He didn’t comment further on the discussions.

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