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Tuesday, July 27, 2021

Slow Recovery in Long-Haul Travel Weighs Heavily on Emirates, Lufthansa

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Emirates Group posted a $6 billion annual loss and Deutsche

Lufthansa AG

DLAKY -1.92%

said it was cutting another 10,000 jobs, as two of the world’s biggest international airlines braced for a slow resumption of long-haul travel.

Emirates and Lufthansa, both dependent on international and business travel, have been among the hardest airlines by the pandemic. While domestic markets in the U.S. and China have started to record strong recoveries, the industry is expecting long-haul, cross-border travel to trail behind as quarantine requirements and restrictions hamper flights between countries.

Global traffic—international and domestic—is at around half of its pre-pandemic levels, Airbus SE sales chief

Christian Scherer

said Tuesday. Domestic travel, led by the recovery in the U.S. and China, is now at around 80% of 2019 demand, with international travel at 27%.

In the first eight weeks of the pandemic, Emirates suspended its entire commercial passenger operation, which uses two of the world’s biggest aircraft types, the Airbus A380 and

Boeing Co.

’s 777, to ferry passengers to far-flung destinations via its hub in Dubai. Emirates, the world’s biggest airline by international travelers before the pandemic, said Tuesday it had cut costs by about 7.7 billion dirhams, equivalent to $2.1 billion, during the year that ended in March by renegotiating its commercial contracts with suppliers, slimming down its internal processes and consolidating operations.

Emirates, the world’s biggest airline by international travelers, said it had cut costs by about $2.1 billion during the year.



Photo:

mohamad ali harissi/Agence France-Presse/Getty Images

It said it has shed 31% of its staff, bringing its workforce around the world to 75,145 employees. Passenger traffic fell 88% in the year to 6.6 million. Annual revenue fell 66% to $9.7 billion. The airline swung to its first loss in 30 years, having posted a profit of $456 million a year earlier.

“No one knows when the pandemic will be over, but we know recovery will be patchy,” Chief Executive Ahmed bin Saeed Al Maktoum said in a statement. “We aim to recover to our full operating capacity as quickly as possible to serve our customers, and to continue contributing to the rebuilding of economies and communities impacted by the pandemic.”

Lufthansa, meanwhile, outlined steep staff cuts, saying it would shed another 10,000 of its 111,000 employees. The carrier had already cut 26,000 jobs since the start of the pandemic.

The cuts are part of the German airline’s plans to save another 3.5 billion euros, equivalent to $4.2 billion, by 2024. Lufthansa said about half of that would be implemented by the end of this year. The carrier said it is expecting to operate around 40% of its 2019 capacity this year, up from 30% scheduled for June. The airline said bookings are up for mainly short-haul European routes and leisure travel. Business travel won’t return to pre-pandemic levels until 2025, it said.

The cuts come as Lufthansa said it is preparing to raise new capital to help repay state aid it took at the start of the crisis to help weather the pandemic. The size and timing of the capital increase hasn’t been determined, and the plan still requires approval from the German state, which took a 20% stake in the airline as part of the bailout deal.

The company also reiterated plans to sell its catering and business travel booking units. It is also weighing options to partially divest parts of its maintenance business, Lufthansa Technik.

Startups, governments and nonprofits are racing to create so-called “vaccine passports,” or digital health passes aimed at helping people travel and safely move around in public. WSJ explains what it would take to get a global digital health pass system off the ground. Illustration: Zoë Soriano

Write to Benjamin Katz at ben.katz@wsj.com

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