Friday, December 3

Lufthansa Weighs Airbus A220 Order to Boost Regional Jet Fleet


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(Bloomberg) — Deutsche Lufthansa AG is considering buying more Airbus SE A220 jets to boost profitability on regional routes as European air travel recovers from the coronavirus pandemic, according to people familiar with the matter.

The German airline group is looking to simplify a regional fleet now made up of several different models across its subsidiary brands, said the people, who asked not to be identified because the talks are ongoing.

A shift toward the lightweight A220 could help Lufthansa hold down spending on fuel, maintenance and training as it builds capacity, the people said. The quest for more single-aisle planes would also mark another sign Lufthansa is on the mend after requiring a 9 billion -euro ($10.4 billion) bailout to survive the pandemic. Earlier on Wednesday, the carrier group reported a surprise profit and lifted its outlook, sending the shares up as much as 6.4%.

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Read: Lufthansa Posts Surprise Return to Profit as Bookings Surge

On a conference call, Chief Executive Officer Carsten Spohr said Lufthansa had sent proposal requests to regional jet manufacturers, the first stage in a potential aircraft acquisition.

There’s been no final decision, and it’s possible Lufthansa will go with a different manufacturer. Other models, including from Embraer SA, are among the possible choices, Spohr said on the call.

Sales Pitch

Airbus declined to comment on confidential talks with customers.

For the European planemaker, a significant order would provide a fresh boost to the A220 program, acquired just before the pandemic slammed aircraft demand. Italy’s new state-backed airline Italia Trasporto Aereo SpA outlined a deal to buy or lease 22 of the jets last month , while Air Canada reversed a decision to cancel two examples.

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Spohr didn’t say how many planes are being considered. Lufthansa’s Swiss arm was a launch customer for the A220. It operates 21 A220-300s and 9 A220-100s.

Airbus has been pitching the A220 with delivery slots for the larger, top-selling A320 series sold out through 2023.

The A220 is relatively easy to fill due to its size, ranging from 100 to 150 seats, depending on which model and configuration is chosen. Many operated even at the height of lockdowns in 2020 when global fleets were largely grounded.

Lufthansa set itself new profit targets in June and deploying smaller aircraft on short-haul routes could help boost the ratio of occupied seats, or load factors, a crucial determinant of profitability for airlines.

On Wednesday, Lufthansa reiterated that it will have repaid the bailout funds in full by the end of the year after successfully completing a capital raise last month.

©2021 Bloomberg LP

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