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Lufthansa narrows loss on cost cuts, booking recovery

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FILE PHOTO: Lufthansa planes are seen parked on the tarmac of Frankfurt Airport
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By Ilona Wissenbach and Tomasz Janowski

FRANKFURT (Reuters) -Germany's Lufthansa said on Thursday recovering air travel and progress on cost savings helped the airline further narrow its losses in the second quarter and record cash inflow for the first time since the start of the coronavirus crisis.

The group, which also owns Eurowings, Swiss, Brussels and Austrian Airlines, reported its adjusted operating loss narrowed to 952 million euros ($1.13 billion) from 1.7 billion euros a year earlier, slightly below the 971 million euros forecast in a company-provided poll.

Lufthansa said the easing of travel curbs and pent-up demand drove significant recovery during the quarter and together with cost savings, which included job cuts, helped stem the cash bleed and deliver a 340 million euro cash inflow.

"The fact that more than 30,000 colleagues have left us in the process so far hurts us all, but is unavoidable to sustainably save the more than 100,000 remaining jobs," Chief Executive Carsten Spohr said in a statement.

Lufthansa shares were up around 0.3% in mid-morning trade.

Bernstein analysts welcomed the progress in restructuring, but noted uncertainty about the group's capital-raising plans.

"There is still no decision around the size and timing of an equity raise, previously planned to be before the election in September – and still top of investors' minds," they said in a note.

Lufthansa said its airlines carried 7 million passengers in the quarter, 18% of 2019 levels, though the numbers improved through the quarter to reach 40% at the end of June. Revenues rose 70% from last year to 3.2 billion euros, a touch below analysts' forecast.

CAUTIOUS OUTLOOK

Rivals, including Air France-KLM and British Airways owner IAG also reported a return to positive cash flow, but like IAG, Lufthansa was more cautious about its outlook than some competitors.

While it predicted high tourist demand and a gradual recovery in business travel in the second half, the group kept its full-year capacity target at 40% of pre-crisis levels and forecast it reaching 50% in the third quarter.

EasyJet and Ryanair, low-cost airlines with no transatlantic routes hit by U.S. curbs on inbound travel, forecast reaching two-thirds of capacity, and Air France-KLM saw it at 60% to 70%.

Lufthansa, which in June laid out plans to return to profitability with fewer planes and staff than it had before the pandemic, said it had already reached half of the 3.5 billion euros in cost cuts targeted by 2024. That was six months ahead of plan, helped by better than expected uptake of voluntary redundancy programmes in Germany and Switzerland.

The group said its freight business made a record profit, while its service arm returned to the black during the quarter.

($1 = 0.8450 euros)

(Reporting by Ilona Wissenbach and Tomasz JanowskiEditing by Maria Sheahan and Mark Potter)

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