Lufthansa Starts Reducing Fleet, Cutting Jobs After State Rescue

(Bloomberg) -- Deutsche Lufthansa AG will cut 20% of managerial positions and accept no more than 80 planes from its current order book as it slashes spending to be able to repay as much as 9 billion euros ($10.1 billion) in government aid.

The German national carrier will also eliminate 1,000 administrative positions in a second round of cost cutting amid a slump in travel demand caused by the coronavirus. The airline’s plan to scale back on deliveries will reduce spending on new jets by half, according to a Tuesday statement.

Lufthansa said in April it will reduce the size of its fleet, which stood at 763 planes last year, by 100 and close the low-cost Germanwings unit. The carrier will now accelerate the process of turning its namesake airline into a separate entity.

Lufthansa last month got shareholder approval for the biggest German bailout package outside of banks and financial institutions in years, but the refinancing means debt will swell and shareholders will be diluted by a 20% stake handed to the government.

The airline has the biggest fleet of any in Europe and the highest labor cost, and will have to reduce both to pay back borrowings before coupon payments rise. The company reiterated that it has 22,000 surplus full-time positions but will avoid firing staff wherever possible.

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