Thank you, Haley, good afternoon, ladies and gentlemen. Thank you for your interest in today's call. Let me briefly outline the format of today's conference call, which we have set up as a joint call for analysts and investors. Our CEO, Carsten Spohr, and Thorsten Dirks, Member of the Executive Board and responsible for Digital and Finance, will present you our first quarter results and give an update on how we are addressing the effects of the Corona crisis. I would also like to introduce William Willms, our Senior Vice President of Corporate Strategy and M&A, who will be around to answer questions on the stabilization package if needed later on. The presentation slides, which the two speakers will refer to, are available in the investor relations section of our lufthansagroup.com website in case you haven't downloaded them already.
The management presentation will be followed by two separate Q&A sessions, one for our analysts in English language, and the second one for journalists in German language. We kindly ask all participants to stick to this order. Thank you very much. I'd now like to hand over to Thorsten Dirks, who will discuss our quarterly results. Thorsten?
Dennis, thank you, and good afternoon from Frankfurt. Welcome to our first quarter results conference call, which is special for various aspects. First, Ulrik Svensson, who has been our CFO since 2017, cannot be here today. He has stepped down from his position for health reasons at the beginning of April. Ulrik, we miss you and hope that you are able to follow our presentation today. We wish you all the best and look forward to seeing you soon again. Second, we would have normally published our quarter results at the end of April. This was not possible because of the corona crisis, which became existential threat for our airline industry and ourselves in just a matter of weeks. It meant that Lufthansa would not have been able to survive on its own.
The stabilization package, which we have just agreed with the Economic Stabilization Fund in Germany, will secure the group's solvency. We are grateful for this support, which this great company and its almost 138,000 employees received. Carsten Spohr will present you the details on this package and its implication for our future. First, let me briefly summarize our first quarter results. The current crisis is unprecedented. What started as a local limited disease has turned into a global pandemic, which brought the global airline industry to a standstill. We got into this situation through no fault of our own. We were one of the first industries affected by the crisis and will be among the last emerging from it. Our reaction to the crisis has been swift and focused. We were the first major airline cutting capacity significantly.
We contained the loss resulting from sudden drop in demand and the imposition of travel restriction and travel bans around the world. Nonetheless, we recorded an operating loss of EUR 1.2 billion in the first quarter. We even expect a significantly higher loss in the second quarter, given that we operated at a minimum level in April and May. Let me briefly summarize performance in our different segments, starting with the Network Airlines. Here, capacity was down 19% in the quarter with far more significant declines towards the end of the period. RASK decreased 5.5% on a currency adjusted basis, burdened by disproportionate declines in Asia, where the crisis hit first. Despite immediate cost reductions resulting in a 9% decline of operating expenses in the quarter, CASK was up 11.1% on a currency adjusted basis.
In sum, Adjusted EBIT amounted to negative EUR 891 million, some EUR 650 million below the prior year level, particularly affected by the sharp deterioration in the long-haul business towards the end of the quarter. This wasn't a factor in the performance at Eurowings, given that its long-haul business, for which Lufthansa German Airlines has taken over commercial responsibility, and Brussels Airlines are now for the first time reported as part of Network Airlines. While Adjusted EBIT at Eurowings continued to be negative, it did not deteriorate any further compared to the prior year. This highlights the progress that have been made in the Turnaround Program announced last summer. The optimization of the network, including the discontinuation of unprofitable routes, accounted for approximately 1/3 of the capacity decline in the quarter.
RASK was up 7.4% on a currency adjusted basis, supported by significantly lower customer compensation payments, which are now netted in the revenue line. This was offset by a 13.4% increase in CASK, meaning that Adjusted EBIT remained almost stable, amounting to a negative EUR 175 million. Let me turn to the Aviation Services, starting with the Logistics business around Lufthansa Cargo, where profits declined to negative EUR 22 million. This had to do with the weaker demand at the beginning of the year, in line with the trend of 2019, and the loss of belly capacity in the later stages of the quarter. The latter, however, led to substantial yield increase in the freighter business, which amount for roughly half of the cargo revenues, a trend which has accelerated further since quarter end.
In the MRO segment, however, the sudden drop in global flight activities and the challenging situation, which many airline customers are in, let profits drop to just EUR 4 million in the quarter. Profits in the Catering segment amounted to a negative EUR 55 million, equally affected by the standstill of global air travel. The results continued to include LSG's European operations, which we agreed to sell to gategroup. The EU Commission approved the transaction at the beginning of April, subject to the condition that the buyer sells certain activities at different airports. We expect the transaction to close once gategroup has fulfilled these conditions. Finally, the results of the other businesses, which also includes the expenses of group functions, declined to a negative EUR 75 million because of losses at AirPlus and Lufthansa Aviation Training. In sum, the group's Adjusted EBIT amounted to negative EUR 1.2 billion.
Adjustments, which describes the difference between Adjusted EBIT and EBIT, and are based on a defined set of criteria amounted to EUR 402 million. They are largely explained by two effects. First, aircraft impairments that had a EUR 266 million impact related to the decision to permanently ground 49 aircraft. Retirements include six A380s, five Boeing 747-400, and 11 A320s, all operated by Lufthansa German Airlines, as well as three Boeing 767 and 13 Dash 8 at Austrian. The remainder is aircraft leased by Brussels Airlines, which won't fly anymore in the remaining lease time. Second, we impaired goodwill at LSG North America and at Eurowings, amounting to a total of EUR 157 million to account for the long and only gradual industry recovery we are expecting. Finally, the corona-driven capacity decline has led to an over-hedging of fuel costs.
The results of ineffective hedges are booked in the other financial items of the financial results. Assuming an only gradual resumption of flight activity starting this summer, and an average oil price in the low $30s in the remainder of the year, we booked a EUR 950 million charge, of which EUR 60 million related to negative option values realized already in the first quarter. Now on the cash flow statement and the balance sheet. Investments declined by 38% to EUR 750 million as we halted all non-business critical investments over the course of the first quarter. Considering the postponement of new aircraft deliveries, which we are currently negotiating with aircraft manufacturers, this trend is set to continue in the quarters to come. Investments in the full year of 2020 are now forecasted to amount to around EUR 1.5 billion or even less, including engine overhauls and non-aircraft related expenditures.
This represents a significant reduction compared to our original CapEx plan of more than EUR 3 billion. In addition to lower investments, the increase of adjusted free cash flow to EUR 620 million was driven by strict working capital management, especially the significant reduction of receivables and the non-recurrence of prior year tax payments. As a result, net debt declined to EUR 6.4 billion. The pension provisions grew by 5% to EUR 7 billion, reflecting the negative performance of plan assets, which was only partly offset by the 0.3 percentage point increase of the discount rate. Ladies and gentlemen, our cash flow performance in the first quarter highlights that the group has shifted into crisis mode already at a very early stage of the corona pandemic. Since then, financial management has focused on cash and the protection of liquidity.
In March, we announced the target to reduce fixed cash costs in our airline business, which account for around 30% of total costs by 1/3 . Two months later, today, reductions are in line with this target we have set. The implementation of short-time work for up to 2/3 of group employees had been the largest driver in this regard and accounts for approximately half of total fixed cost savings, despite the top-off payments made by the company and guaranteeing employees between 85% and 90% of their last net salary. In light of the dimensions of the current crisis, we strive to reconcile the top-off payments and economic reality. The discussions which we're having with the social partners and operating partners in this regard, I can tell you are not easy, but progressing in a constructive way.
Other drivers of the reductions include further personal measures such as the expansion of flight hours, project postponement and cancellations, as well as the shift of aircraft maintenance. The drawdown of credit facilities, the issues of commercial papers and promissory notes for further bolstering our liquidity position over the course of the first quarter. Centrally available liquidity amounted to EUR 4.25 billion at the end of March. It has become clear since then that raising new funds is only possible at extremely unfavorable terms. Some markets, such as the aircraft financing market, are effectively closed altogether. In the absence of new financing opportunities, limiting our cash burn has become even more important. At the moment, our cash burn amounts to around EUR 800 million per month, benefiting from the considerable cost savings I mentioned earlier. We expect cash consumption to remain at similar levels in the months to come.
However, substantial working capital risk and upcoming refinancing needs create a risk that liquidity reserves will be exhausted shortly. First, new bookings will remain far below normal levels despite the gradual restart, which just begun. At the same time, flight cancellations mean that customers can claim up to EUR 2.5 billion of refunds. Despite the success we are having in offering vouchers and rebookings, the remaining risks continue to be substantial. Second, we will have to repay around EUR 1 billion of financial liabilities due to the remainder of 2020. Third, trade payables continue to amount to more than EUR 2 billion. Last but not least, fourth, the crisis has hit many airline customers of Lufthansa Technik, causing increased default risk going forward.
In light of these risks, it is evident that our measures to protect liquidity and the expected recovery of cash flows towards year end will not be enough to secure the group's solvency. We are dependent on receiving financial support from the governments of our home markets. In this regard, the stabilization package we agreed with the Economic Stabilization Fund in Germany has been a milestone. Our CEO, Carsten Spohr, will present you more details on the package. Before turning over to him, let me conclude my remarks with our financial outlook. Carsten will outline our expectations of a gradual recovery at the airlines in the second half year shortly, so let me focus on Aviation Services. The Logistics segment is the bright spot in our business at the moment.
I alluded to significantly high yields in the Lufthansa Cargo freighter business earlier, supported by the current imbalance of supply and demand following the large-scale grounding of passenger aircraft. This is why we are operating 40 passenger aircraft across the group for the transportation of freight. As a result, we expect the Adjusted EBIT margin in Logistics to be clearly positive this year, following almost zero profits in the prior year. For our MRO and Catering businesses, however, the outlook is far less positive. Lufthansa Technik is hit hard by a significant deterioration of utilization starting in March, reflecting the sharp decline in global flight activity. The same is true for the Catering segment. In both businesses, cost savings will only partly offset the profit impact from lower sales. In sum, we continue to expect the group's Adjusted EBIT to decline significantly.
Low visibility and high levels of uncertainty, however, make a detailed financial outlook impossible also at this stage. Thank you very much, Carsten, now over to you.
Yeah. Thank you, Thorsten. Thank you, Dennis. Ladies and gentlemen, good afternoon and a warm welcome also from my side. Obviously hope you're all doing well and healthy in these, let's say, interesting times. After the developments of the past days and weeks, the quarterly results that we are reporting here today are probably moving somewhat into the background. As you know, in view of the far-reaching and long-term effects of the corona crisis on our core business, we have worked hard to secure our solvency, and since a few days, I might say with success. Today we can state that important prerequisites for securing our financial stability have indeed been achieved. We therefore have a solid base to continue with our successful strategy as the leading European airline group.
We still call and will remain so the most stable in terms of economics markets of Europe as our home markets. We obviously still run a proven multi-hub model with our premium network carriers at its core. We will carry on with complementing our Hub business with leisure travel brands like Eurowings and Edelweiss in Switzerland. It's still true that our service companies are contributing to the strategic value of the group. Although the corona crisis may change our industry these days, there are values and beliefs that will endure beyond the crisis. One principle that we at Lufthansa follow with deep conviction is, as you well know, balance. Only if we take the interest of our customers, our employees, and our shareholders equally into account, we will continue to be successful in the long term.
This conviction applies, in my personal view, beyond corona, and it remains and did remain our compass, even in these very difficult phases we have been through. The stabilization package agreed with the German government for us is a basis for a sustainable future. At the same time, it's a huge debt package on our back to be paid back within only a few years, including its interest. In that sense, the package becomes an accelerator for us to make this company, Lufthansa, more cost efficient, leaner and faster, and more cash flow oriented.
I want to be honest, it has been tough to accept that the Lufthansa Group will not be able to overcome this crisis on its own, despite our solid financial position before the crisis and the tremendous reaction of the crisis teams in all parts of the organization since the global spread of the virus. We were fast, to give you a few examples, in cutting our capacity in order to not operate loss-making flights. We grounded the vast majority of our fleet within just weeks, and we reduced a third of our fixed costs and postponed around half our investments planned for the year 2020. We have done our utmost to mitigate the effects of a crisis that hit us without any fault of our own. Let me therefore express my gratitude to the states, the governments of Germany, Switzerland, Austria and Belgium.
They left no doubts on the economic value and the importance of their home carriers. A lot of work has been done in several governmental departments and administrations of these countries. There's still a lot of work ahead of us. A sincere thank you to all the people within the governments and of course, in our companies who have contributed on the financial stabilization of the Lufthansa Group in the last weeks. The stabilization package negotiated with the Economic Stabilization Fund in Germany, in short, WSF, totals EUR 9 billion and includes different modules of equity-like participations, and a loan. Negotiations have been long and intense. However, the package is the best possible result for our shareholders, for our employees and for our customers. The package, and only with this package, we will ensure the going concern and viability of the group for the times of the crisis.
It preserves Lufthansa's integrity as an integrated airline group. It includes precise agreements which ensure that the state will be able to exit once we have paid back the silent participation. It secures the necessary strategic and operational flexibility of the Lufthansa Group, ensuring that this company is sufficiently competitive and financially strong to tackle the challenges ahead. We are therefore confident that the measures will receive the necessary majority at the extraordinary general meeting, which we'll be holding on the 25th of June. Maybe allow me to add a personal comment here. Surely before corona, a 20% government stake was nowhere in our plans. Still with now looking at this stake to be a reality soon, we are still having a smaller government share than all three of our major competitors, which as you know, are Air France- KLM, IAG and Turkish Airlines.
In a way, the level field is there again. The stabilization package secures our solvency. At the same time, it increases the need to restructure our business. Yes, it gives us the necessary time to get through this, but it's no alternative for deep restructuring as one or the other might think overall. This view was also shared by the Supervisory Board when they approved the stabilization package just this Monday. We need to repay the additional debt as well as the silent participation as soon as possible as interest rates and coupons will raise over time. EUR 8.7 billion in total, plus interest. In total, we will carry an annual additional burden of more than EUR 1 billion when summing up interest and coupon repayments as well as redemptions. It becomes obvious that in light of this additional burden, we must not limit our thinking.
We will turn every stone in the company, never waste a good crisis, with a relentless focus on the generation of cash flow to repay the stabilization package as quickly as possible. With this in mind, we are focusing mainly on three areas. First, we will raise funds by financial restructuring measures as well as changes in our corporate structure. In other words, we will have to look into active portfolio management. This could mean the selective divestiture of non-core businesses and assets once markets have picked up. We will start with the sale of the international part of our catering unit, LSG, which as you know, has been put on hold for the moment. Second, probably most importantly, we will have to go through a significant operational restructuring. We must adjust the group size and structure to a new normal.
That means an environment in which demand will remain depressed for years, especially in our key segment, corporate travel. Compared to pre-crisis levels, we expect our fleet to be around 300 aircraft smaller in the year of 2021, around 200 aircraft smaller in 2022, and to be still around 100 aircraft smaller in 2023 and beyond. We target capacity to reach pre-crisis levels with 100 aircraft less. This obviously can only be achieved with the higher productivity of our fleet, which is key in reducing unit cost. We won't be able to overcome this challenge by the usual means of small-sized productivity improvements and just incremental savings. Soon we will meet again with our unions to talk about ideas how we jointly reach substantial progress in productivity and cost savings even before we approach the AGM at end of the month.
Let me be clear, we want to evade layoffs as much as we can to adjust the size of the organization to a business which has become much smaller. However, this can only work out with smart and creative solutions to be found and agreed with our labor unions very soon. Thirdly, we require and expect contributions from all stakeholders. This is not a Lufthansa fight, but an industry and global economic crisis. We need a new cooperative approach with airports, air navigation service providers, OEMs, and other suppliers with a goal of achieving significant cost savings. Let me give you a brief overview of our plans to ramp up the passenger flights again before I come to a close. The impact of this crisis on the global economy, and in particular on the aviation industry, will undoubtedly stay for a long time.
The worst in terms of traffic decline with almost a complete grounding of our fleet is at least now behind us. We are starting to rebuild our network again. We do it literally route by route as the world is opening up only step by step. Countries have begun to relax entry restrictions or have begun to relax travel bans, as just Germany did a few hours ago. People in Europe and other parts of the world finally do make plans for summer holidays and consider visiting friends and relatives again. Demand, of course, continues to be far below pre-crisis levels, and current bookings are coming in either on an extremely short term or a rather long-term basis. We can see a stable and continuous improvement though, but it's still on a rather small scale.
When it comes to our fleet and network strategy during the restart phase, we follow clear principles. Our aim is to serve many destinations using smaller aircraft and operate lower frequency patterns initially. We primarily focus on expanding the width of our network, at the same time minimizing our commercial risks. Once the network is sufficiently wide, we will concentrate on serving high demand markets by reintroducing additional frequencies. In June, Lufthansa, SWISS and Eurowings are back in the market by offering over 2,000 weekly flights to more than 130 destinations, at least if you consider it worldwide. This represents a significant expansion compared to the minimum flight plan of the recent weeks. Austrian Airlines and Brussels Airlines will resume operations in around two weeks from now. In autumn and winter, we expect to operate at levels of around 40% of our regular capacity in the fourth quarter.
We will be able to serve 70% of our planned intercontinental destinations and 90% of our continental destinations by the month of September. This is of course, all assumption based. We'll adjust our flight schedule along actual demands in iterations and the flexibility of our fleet and our multi-hub systems are obviously allowing us to show great response here to market demands. Ladies and gentlemen, in every crisis, there's also an opportunity, and as the group's management teams, we are doing our utmost to make Lufthansa emerging faster, leaner, and even more competitive from this crisis, and therefore ready to even foster our leading position in Europe. With that, we're now looking forward to your questions. Thank you.
Operator, will you call the first question, please?
First question comes from the line of Daniel Röska with Bernstein Research. Your question, please.
Gentlemen, good afternoon. First of all, hope everybody's healthy and well. Three questions, if I may. Retaining the EUR 9 billion within three years is quite a steep order. Could you quantify in broad terms which proportion of that do you expect to achieve from the restructuring, improving operating cash flows? Secondly, the sale of assets, be it subsidiaries or aircraft or leasebacks, and possibly thirdly, unsecured funding, either on the debt or additional equity measures. When that would lead you back to previous net debt EBITDA levels, roughly. Secondly, maybe a bit more on the restructuring and the cash flow potential from that, please. Your fleet plan for 2021 is down roughly 40%. Is that an indication for your ambition in the operational restructuring?
It seems you're not getting back to previous levels until 2023, so there must be a discussion on how to resize the organization and what are the targets you're walking into the union negotiations with. Lastly, because there reportedly are some more restrictions on the bailout package, could you comment on what the restrictions are, or concessions related to the bailout, both with the WSF and the EU Commission? Thanks.
Röska, good to see you. On your first question, it's obviously too early. We have this ambitious payback plan, and as you well know from the details, there is flexibility if we need it. Which share will be done in the various elements you mentioned, I think it's too early to say. Of course, it will be optimized along the way. Important thing is that we have all three modules available to us. Just think about our unencumbered assets in the fleet of EUR 10 billion. Think of the various entities we own, other airline groups don't. I think there's lots of room to optimize along the way. When it comes to enter the union negotiations, for me, there's three beliefs. One is we have to share our work.
Obviously, as you quoted, less work among the smaller fleet to be operated among more people by everybody working less, and of course, making less money, which is what I call innovative part-time models. If these can be achieved, the more these can be achieved, the more people we can keep on board. The less we can achieve this, the more people have to leave. Second, I think we'll need to do that fast. We want to show some first results before the AGM or the additional general meeting end of the month. Thirdly, we will not give any concessions in terms that one group is optimizing itself on behalf of another group in the company, be it abroad or domestically. There was a third question, Dennis?
Restriction bailout.
Okay, the restrictions on the bailout are the ones which are part of the European-
Temporary
Temporary framework or the German so-called Wirtschaftsstabilisierungsfonds, which means there is no dividends while we have not paid back 75%. There is no bonus payments to the staff and the management while we are enjoying the stabilization elements. There is a ban on acquisitions of more than 10%, unless we have paid back 75% of the money. There's typical things like, we need to continue to improve our CO2 footprint, which we were doing anyway. As you well know, there's basically no execution of the voting rights of the fund in our AGM. Also, there's two additional seats, two seats on the Supervisory Board where we can make proposals for, and the government has the right to refuse our proposals.
Thanks. Just to follow up there, along the discussions of the past couple of weeks, there sometimes surfaced a comment around being a good customer to Airbus, similarly, what was discussed at the Air France table. Did any of that wind up in the final agreement?
No. We are a good customer of Airbus. We're a good customer of Boeing, we're a good customer of Embraer. OEMs love us because we buy every airplane. That was the insider joke. You know that decades of relationships to the OEM, we will continue, hopefully, to have decades of relationship. There was a moment where there were some ideas, but we have been able to negotiate those away. That now is determined there that there will be a maximum of 80 aircraft entering the fleet, and these aircraft obviously need to improve their environmental footprint, but there's no mentioning from which OEM they have to come from. We have orders, as you know, with Boeing and with Airbus. These relationships with Airbus and Boeing are close. Don't give all the comments you read in the papers.
All right. Thanks very much.
Next question is from the line of Neil Glynn with Credit Suisse. Your question, please.
Oh, good afternoon, everybody. If I could also ask three, please. The first one, Carsten, you mentioned a new cooperative approach with the value chain, which is certainly something we've been thoughtful about. I guess you expect airport and ATC tariffs to be reset, but I'm interested if that is the case, but also how do you think about employment and the scope for perhaps some of your employees to even find employment at other state-controlled value chain players? Tied to that, can you frame at this point, early as it is, how do you think about the role that your hubs play relative to the decentralized traffic in Germany? I guess ordinarily one might expect Eurowings as a lower cost platform to play a bigger role at Frankfurt and Munich.
Interested to understand whether you think it's fit to do that and whether the hubs gain in importance as part of this restructuring plan. The third question, I think it was Thorsten who talked about the corporate traffic relevance and about 50% of your passenger revenues per last year's capital markets day. Obviously, there are major questions about what proportion of corporate demand may well be permanently lost. Again, I know it's early, but would love to understand how you go about assessing that with some of your key corporates, if you can.
Thanks, Neil. In the value chain, obviously, you know our view, which we probably share with every European airline, that there's, in the value chain, not enough profit for airlines, but too much profit for others. I think many of these in the value chain are government-owned to a high degree. I would expect that governments will try to enhance travel in their various airports and areas. I think there will be some support looking forward to. When it comes to the shrinking volume of those, obviously that answers your second question, is there going to be additional jobs for people who have to be laid off from Lufthansa. Probably very limited because I think we're looking at a shrinking aviation industry in total. In Germany in particular, the unemployment, as you well know, is very low.
I think even with the recession we're heading for, it might be easier to find a job here than in some other parts of the world. Overall, I think we'll be looking at shrinking business in many, many parts of the economy. Hubs with Eurowings, as you know, our policy hasn't changed. We have a multi-brand approach, multi-production platform approach. We always use the best platform for the market. We have been operating 330s out of Frankfurt and Munich before corona hit us. We're probably looking at expanding those to a few more aircraft. We're looking at short-range aircraft already operating in Munich. We might see them in Frankfurt as well. Whatever the market, including competitors' behavior, allow us to do in a profitable way. Corporate travel, indeed, I think we are all looking at companies in cost saving mode.
We're looking at a smaller economic environment around the world, most likely. As you also know, we have been shifting from corporate towards leisure travel for some years now. Look at the configuration of our aircraft. Smaller business classes, sometimes first class being taken out to optimize profitability. I think we are well set for that trend and probably will continue.
Great. Thank you.
The next question is from the line of Stephen Furlong with Davy. Your question, please.
Afternoon, everyone. Just three quick ones. Carsten, I was just interested, looking longer term, I assume, as the annual report states, that you'd like to safeguard the current investment grade rating for the long term. I assume the long-term goal would still be to be back at some stage this decade or in the middle of the decade at investment grade. The second thing, I notice, just might comment again about in 2010, just looking down a couple years down the road, you say you'd be 100 aircraft smaller in 2023. Do you think Eurowings, it's too big for purpose? This was always maybe a question post the Air Berlin acquisition. I know it serves a role, but is it too big?
Just a final thing, maybe just comment about the EU's comments on or about the slot pair giveaway of the 24 slots at Munich and Frankfurt. How do you feel about that? Thank you.
Stephen, when it comes to have an investment grade rating, I think we have been enjoying investment grade rating for many, many years, and we're looking to get it back as soon as possible. I cannot give you a year or a time frame on that. We all know this industry is looking at uncertainty, and we're just positioning ourself in the very, very best way. Maybe I didn't mention it often enough in my opening remarks, flexibility is going to be key in many ways, and whatever allows us to get back to the investment grade rating, we will be happy to do so. The 100 aircraft we are roughly estimating to be smaller than you refer to Eurowings. Eurowings already is now looking at a target fleet between only 90 and 100 aircraft.
We came from a much higher number before the crisis, as you know, after the Air Berlin acquisition. Probably if you take that as a starting point, Eurowings shrinks to the highest degree. Of course, we have to take the Brussels Airlines change of strategy in there. In the end, it's about profitable growth, and we will rightsize our business according to the profitability. When it comes to Frankfurt, you know the ruling for aircraft slot equivalents in Frankfurt, four in Munich. They can go to new competitors initially only. Of course, we will behave as you behave when the new competitor starts to compete with you. Competitors have made experience with competing with us, and maybe new ones will make an experience to compete with us. They have to be based in Frankfurt.
It's not only slot optimization of those who already operate here, it's only equivalent for aircraft which are based in those two airports. Did that answer your question?
Understood. Thanks, Carsten. Thank you.
Okay.
Next question is from the line of James Hollins with Exane BNP. Your question, please.
Hi. Good afternoon. A few from me, please. First of all, the aircraft financing market you said is basically dead. Is that opening up? With regards your comments about selling assets, are we categorically moving away from a virtually fully owned fleet? What might you expect the owned versus leased fleet percentage to be by 2023? Secondly, following up from Neil's question, would you be pushing very aggressively for tariffs to come down in Frankfurt in 2021? Obviously, there's the annual negotiation. Finally on cash burn, would you expect cash burn to be actually higher in Q3 than it is currently, given you're operating, I think, 40% of your capacity and obviously with all the comeback around that? Thank you.
Well, when it comes to the aircraft financing market, who knows? Right now, obviously, it's a bad time to finance aircraft, which is the reason why we have not done it significantly over the last weeks. Would have been another way to raise capital, but we just don't believe that the terms are right. We definitely will be moving away from almost 100% ownership in the next years. I think every aircraft we'll be accepting over the next three years will basically either be leased or be going into sale and leaseback within a day once you receive it, because obviously the cash flow is needed for other means now, including the payback. The market will drive our exact number of aircraft to be sold and then leased back. Any of you interested in aircraft deals, call me.
I have about 700 available for you of every size. Depending on how many of you call me, we'll make sure that there is enough aircraft to be sold and leased back if the terms are right. We are now in a comfortable position that we don't have to do this as fire sales, which is why the EUR 9 billion is a number which gives us room to optimize our business, including room to optimize our finance structure. The cash burn definitely has reached its peak in April when I made those statements about the EUR 1 million per hour, which surely was understood by every staff member in Lufthansa, which was the intention, and every journalist in Germany as well. We are reducing it now.
By the way, there's a quite high element of fuel hedging in there, which is going down now month by month, with our cost saving. We are optimizing our short-time patterns for our staff and many other means, we're increasing our number of aircraft operating. We only operate with a cash positive flight. All these combined, you will see that the cash burn rate significantly comes down. The airport fees in Frankfurt are always too high. They will always be too high. They were always too high. Let me start with that one. Indeed, I think also airports are looking for a more depressed market and they're more competing with each other. At least the hub airports will be competing more for transfer traffic because there will be resources not only in the five Lufthansa hubs, but also in Paris, London, Amsterdam.
I would think if we all believe in markets will also work on airport fees. Yes.
Can I just follow up on the fleet? I think, just clarifying something you said earlier, I think you've got just shy of 200 aircraft for delivery, and I think you said you're taking a maximum of 80. Can you just let me know what I should be thinking?
Yeah, the number of 80 is right. We'll be receiving even less than 80 aircraft over the next years until the end of 2023. We're significantly pushing back aircraft with Boeing and Airbus.
To 2023. Okay, thanks very much.
Thank you.
The next question is from the line of Muneeba Kayani with BofA. Your question, please.
Hi. Two questions, please. First, on your fuel hedging strategy, given the experience this year and the fuel hedging losses, would you consider changing your strategy going forward? Secondly, on the seniority of the silent participation, is it junior or pari passu to the existing debt and especially the hybrid? Do you intend to call the hybrid next year? If you could just help us understand the priority of payments on the silent participation over the other debt.
I'll start on the fuel hedging strategy. The strategy prevailing at the European airline industry are indeed not effective in a crisis such as the one at the moment. Obviously, who could have expected this? We indeed consider adjusting our long-term hedging strategy to increase our downside risk. To be honest, we haven't made a decision yet.
This is William, to your second question the silent participation one is, as you rightly mentioned, a hybrid instrument. It is senior to equity. It is therefore junior to the KfW loan. On the hybrid, the second silent participation, that one again is senior to the silent participation one, as it is a debt instrument and structured as a debt instrument.
Thank you.
The next question is from the line of Jarrod Castle with UBS. Your question, please.
Thank you and good afternoon. Three as well, please. You gave a CapEx number for this year of EUR 1.5 billion or less, and you obviously answered the question around pushing back fleet delivery. Just in terms of magnitude, any color how we should think about 2021 and 2022? Secondly, just coming back to the slots that you have to give up, were the exact slots specified, or do you have any control over which slots you actually give up? Just looking again into 2021, should we be thinking of capacity being 50% or less, just given that 300 planes aren't coming back, et cetera? Thanks. Hello?
Good afternoon. The CapEx numbers, I will hand over to Thorsten in a minute, because they are only rough, of course, estimates on those. On slots, let me go to that. The ruling which we have agreed on as a compromise is that our competitors first need to apply for regular slot distribution methods through the slot coordinators. If they cannot obtain a slot there, they can ask for a slot according to their wishes, and we have to fulfill that requirement for a long-range slot within 60 minutes each way, for a short-range slot within 20 minutes each way. These slots have to be operated on top of slots which they already operate, in case it's somebody who already has an operation. This is our, whatever you want to call it, impact or input on the slot selection process.
The other way around, the requirement for the other party. The last question was on aircraft. The 300 aircraft on the ground next year, you covered, but you want this in ASK. Is that how I understood your question?
Yeah, just wondering how much capacity you think we'll fly next year?
Well, it's difficult to say because it would depend on the U.S. opening up, when is it opening up? I would see us going maybe to 60, maybe 2/3 probably next year in the peak, of course, what we're talking. We talk about September maybe, or June, which is, as you know, the best time. The U.S. slot is huge as you well know. Not quite as huge as for IAG, almost half of our wide bodies operate on the North Atlantic alone between the U.S., Canada, and Europe. A lot will depend on that. If they continue to burn their cities, it might be less.
Carsten, thanks. On the CapEx, as I said, this year we planned EUR 1.5 billion in total, of which we, as I told you also, have already consumed EUR 770 million in Q1, a little bit more than half of it. From April to December, another EUR 750 million, approximately. For the next year, you should expect less than for the full year 2020, gradually growing to the numbers you have seen before the crisis until 2024.
Okay. Thanks very much.
The next question is from the line of Caroline Dawes with Morgan Stanley. Your question please.
Hi, good morning. First question is on the sale of non-core. You used to talk about potentially being open to a minority stake disposal of the MRO business. Has this changed and you could consider selling the entire business and will be classified as the foreign non-core? My second question is if you could give us a bit more color on the 15% of total capacity that is back online, what kind of load factors are you seeing? Third, as you go through the year and some of the airlines have been saying that they are going to stimulate demand through price, what is your strategy? Just to retrieve and focus on profitable routes? You're going to want to compete for share in your home markets?
Caroline, yeah. We never compete for market share. We always compete for money and profitability. In times like this, even more than. Market share is not a decisive KPI in Lufthansa. It's one which we enjoy where we have it, but we don't steer the company by it. The same is true for load factor. We manage by revenue in Lufthansa, revenue per flight, RASK. Obviously with no booking patterns being available, our yield management is in a very difficult situation like everybody. We see short-term bookings for the next three to seven days, then we have a gap of a few weeks, then we have long-term bookings for the fall when things are supposed to be back to more normal patterns. I cannot give you any load factors at this point.
We have increased the capacity on a few routes already because the load factors have been too high to optimize the yield management. We bring bigger aircraft into the system. You know we have anything between 90 seats and 500. We play with that optimization tool. MRO, Lufthansa Technik, as you know, it's part of our core. This is close to our hearts. We will not give that up easily at all. We have been talking about a partial IPO before corona. Is there any partnering ideas for part of the business? As you well know, there's different divisions in the business. In engines, we already basically have 100% partnering. In others, we have 100% on our own, so there is no yes or no answer on this one.
Again, the market at this point of time is the wrong one to do any divestment, and it's good to have that value within the company. The options which we mentioned before corona might be the options we have after corona.
Operator, we're ready for the next question.
Next question is from the line of Malte Schulz with Commerzbank. Your question, please.
Hi. Good afternoon. A few questions I would like. First of all, did I understand it correctly that you want to achieve the 29% capacity with 100 aircrafts less, or did I misunderstand that? The second question, in terms of your labor contracts, you have, particularly with Lufthansa mainline, quite expensive union contracts. Did you see there any progress or any likely progress that you can get to better competitive contracts? Particularly also keeping in mind that a lot of your key competitors can renegotiate their contracts or have a little bit laxer labor laws, which allows them to make more pressure on the unions. I think, yeah, that was it.
Indeed, our estimate is that in 2023, which we consider the first year of the new normal, we'll be able to operate roughly the same capacity as in 2019, with more or less 100 aircraft less. Why? We'll be selling some smaller aircraft, or not necessarily smaller aircraft, but some less dense configured aircraft. We'll be receiving aircraft with higher seats per aircraft numbers, 777, 350s replacing aircraft with less seats, 320s in a higher density configuration, replacing old 320s with less seats. All that, plus higher productivity, plus probably a little higher share of Eurowings, which tend to have a higher productivity, will give us more or less the same capacity with only 12% less aircraft in numbers.
In union negotiations, obviously unions understand, not only in Germany, also in Austria and Brussels, in Italy, that the company is shrinking and the number of people to be laid off will depend on their flexibility, be it on part-time, be it on labor cost per se. We are in the middle of that negotiation, but it's obvious when you shrink a company, usually the unions are able to compromise with you, which are much less when you grow a company, at least in our environment. I would answer your question with a clear yes.
Okay. Can you maybe also stretch why you needed EUR 9 billion and couldn't have survived with, let's say, EUR 5 billion package? Given that you already had EUR 4 billion liquidity.
Well, we are Germans, we are boring, we love safety. We didn't want to go to the edge of what we need. We are among the top three airlines in terms of turnover in the world, and I think we were able to convince the German Government that this is not about just survival. This is about maintaining a global leading position, which some German companies do, but some are also looking at risks at. I think the German Government was highly interested to have one company among others, don't get me wrong, which is playing in the global top league and allow it to continue to play in the global top league. This, I think the EUR 9 billion will ensure.
If you look at similar sized airlines in the U.S., American , Delta, United, or our friends in Paris and Amsterdam who are a little smaller, even received EUR 11 billion. The EUR 9 billion very much is in line with the size of the company. It's not an extraordinary number, but we believe it's enough to keep us in the top league. As I said, we now are 20% government-owned, but it's still less than all three European competitors have as a government share. I think IAG has 25%, Air France-KLM has 26%, I think, and Turkish Airlines, I don't even know. Again, it was not my plan to be government partly owned, but compared to our three biggest competitors, we still have a lower government share than the other three big ones we are fighting with.
Okay, thanks.
The next question is from the line of Johannes Braun, MainFirst. Your question, please.
Yes. Thank you. Two questions for me. Firstly, you earlier mentioned you expect airport fees to decline because you expect them to follow market logic. I guess the problem with that view is that normally airport fees do not follow market logic, as airports are regulated. Quite to the contrary, fees can increase if volumes are down, if regulation is followed strictly. Why do you think your airports will still lower the fees? Secondly, I guess one for Thorsten. Free cash flow was quite positive in Q1. You mentioned lower CapEx. There is also some EUR 400 million positive impact in trade working cap, which is quite counterintuitive in the current situation. Why was that?
Yeah, let me start with the first question, and the second one will be answered by Thorsten. I would love to hear what you said about airport fees, and I could spend an hour with you on that one, but I do believe we'll see some impact. When you look at the five hubs within Lufthansa alone, only the internal competition among those five hubs, which we have been, I think, able to optimize over the last years, will increase because the passenger numbers are smaller. There is extra aircraft on the ground in every one of our hubs, and my network people will now, of course, optimize that, including cost elements.
I think the optimization game of our multi-hub system, which we believe is a serious USP because the five hubs are so close to each other that many flows, the majority of traffic flows, can be done by any of those five, with some exceptions like Africa and so on. I think that optimization is able for us to put pressure on airports we maybe have not seen before. The other way around, we don't need all the airport capacity if we don't get the right concessions.
We might put traffic flows via other hubs where there's extra capacity available, including staff, including aircraft, including slots, you name it. I think we'll see some of that definitely move in the right direction.
Okay. On the working capital that you already mentioned, on one side is the reduction of receivables, which we immediately introduced by starting negotiations with our suppliers, especially on payment terms. A second driver is the non-recurrence of the prior year's tax repayments. Sorry, tax payments, not repayments. Tax payments.
Yeah. Understood. Okay. Thank you.
The next question is from the line of Andrew Lobbenberg with HSBC. Your question, please.
Andrew, we can't hear you. Andrew, don't be so shy.
Okay. I'll take myself off mute if you really want. Sharp as ever. The business is going to be smaller for some time. If you think about how hubs work, there are very powerful scale economics, and as businesses get smaller, you get fewer connections, and they work a lot less well. Whilst I appreciate you want to be a multi-hub system, why, when there's such a reduction in capacity, is it a given, or why is it logical that you continue to operate five hubs? Because every hub that gets smaller gets less efficient from connectivity. Related to that, perhaps, can you update us with the status of the aid negotiations in Belgium and in Austria? Finally, as a traditional third question, can you tell us what the liquidity is today, and when does that EUR 9 billion come in?
Does it all have to wait till the AGM, or is some trickled in through the back door already? Thanks.
Yeah, Andrew, you surely mention one side of the equation. Hubs get smaller when volumes get smaller. Don't forget, hubs start to offer or serve, not offer, serve new O&Ds when overall point-to-point cost comes down. My network people have seen O&Ds via our Frankfurt hub they have not seen in years, because suddenly there's a demand for Gothenburg, Lisbon, which probably is served in good times nonstop, I don't know, once a day. Now suddenly everybody going from Gothenburg in Sweden to Lisbon in Portugal has to go via hub, and then the hub system kicks in. I think your logic works one way. The larger the hub, the higher the scale advantages. It works the other way around. The smaller traffic volumes, the more there are certain O&Ds not being served required to go via hub.
Far, I would think we have seen the more positive side of this, at least in Frankfurt over the last weeks, which of course, are not normal weeks. Of course, when we work on scale, to be honest, our largest aircraft, the A380, which will be grounded partly forever and partly at least for a couple of years, has not been the most efficient aircraft. Some of the scale effects you're referring to doesn't work anymore with modern aircraft. Today we are opening up Munich, Los Angeles with a A350, which has been usually served by a A380. The unit costs are higher on the A380 and are now lower with the A350 we are operating as of today. Some of that long-term logic has been reversed by aircraft technology, which as we all know, is why A380s don't work anymore that well.
The five hubs create internal competition. They give us a great market share in any of the five hubs. Of course, there are certain focus elements like for example, Eastern Europe out of Vienna or Africa out of Brussels. That hub system, we do believe, start kicking in at a certain size. Don't get me wrong, right now we're only operating three hubs for that reason you are mentioning, we only start to operate hub number four and five in two weeks. Even that is mainly on an O&D basis initially before we really go into hub scales. The AGM indeed is the day which would trigger the transfer of the money from the German government.
I think the liquidity we gave you at our annual was EUR 4 billion. You more or less know what we are losing in terms of cashflow per hour. At the same time we have been able to do some refinancing. So the AGM we are looking to, I think with some optimism that will be early enough to serve us. And of course when we talk about liquidity we never talk about actual liquidity, we talk about the so called legal liquidity. Which means we have less funds due than money on the bank. Otherwise we wouldn't have any problem at all with doing this on the cash side.
Yeah, thank you very much.
Can you just say what the status is of the talks with the Belgian and Austrian government?
I think I would say Austria we're in the final part of negotiations. I actually just got my corona test being done this morning to be able to see the Chancellor tomorrow. That corona test hurts in your nose. I will now insist on closing the deal with him tomorrow after I went through that pain. Brussels is at an earlier stage, we'll need a little bit more time there. The higher the money, the faster it goes, it seems like. Brussels is a little bit more complicated and probably we don't see a solution this week there. Austria, I'm positive we could see a solution this week.
Thank you.
Yeah.
All right. Thank you very much. This concludes the first part of our Q&A sessions. As I said at the beginning of the call, we'll have an additional Q&A session now for the journalists who have also been on the call. For the purpose of this Q&A session, we'll switch to German language and I'll hand over to Andreas Bartels, who will take over. Of course, the analysts and investors are also invited to stay on the call as you prefer. Andreas.
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