The COVID-19 pandemic has made life extremely tough for airlines. Lufthansa (OTC:DLAK.Y) has been hit particularly hard. The largest European airline group was already less profitable than many of its American counterparts in recent years. Lufthansa is also heavily exposed to long-haul international travel (especially business travel), a market segment that is expected to recover very slowly.

As a result, Lufthansa announced earlier this year that it planned permanent reductions to its fleet size. The company now appears to be planning additional early aircraft retirements. This decision could be good news for Boeing (NYSE:BA) in the long run. Let's take a look.

An airline giant shrinks

Lufthansa Group consists of several European airlines, including Lufthansa, SWISS, Austrian Airlines, Eurowings, and Brussels Airlines. Together, they operated 763 aircraft as of the end of 2019.

At the peak of the COVID-19 crisis, when many international borders were closed and air travel demand was virtually nonexistent, more than 90% of this fleet was parked. Management expects a very slow recovery over the next three years. Lufthansa assumes that the crisis will be over by 2023, but demand still won't be strong enough to justify 2019 capacity levels.

A Lufthansa Airbus A350 in flight.

Image source: Airbus.

In response, the company decided earlier this year to reduce its fleet by 100 aircraft by 2023 through a combination of early aircraft retirements, lease terminations, and limiting new aircraft deliveries to 80 or fewer through 2023. Planes confirmed for early retirement in the initial wave of fleet reductions include six Airbus (OTC:EADSY) A380s, seven Airbus A340-600s, three A340-300s, five Boeing 747-400s, and 21 A320s.

Additional fleet cuts on the way

Unfortunately, the pandemic-driven aviation slump appears likely to last even longer than previously expected due to recurring flareups in various regions. As a result, Lufthansa is weighing the retirement of about 30 additional jets in the coming years, according to Reuters. This could include phasing out all of its remaining A380s, 747-400s, and A340s. Such a move would be consistent with Lufthansa's broader strategic goals of simplifying its fleet and phasing out aircraft that are expensive to maintain.

Whereas four-engine planes fell out of favor years ago among most airlines, they still account for a huge proportion of the Lufthansa wide-body fleet. Entering 2020, nearly half of its passenger wide-bodies (89 out of 181 aircraft) were four-engine jets. Moreover, they constituted about half a dozen distinct subfleets, adding significant complexity to the company's operations.

Within a few years, Lufthansa's 19 Boeing 747-8Is -- all delivered between 2012 and 2015 -- may be its only four-engine jets. After factoring in modest retirement plans among the company's twin-engine wide-body fleet, 40% or more of Lufthansa's passenger wide-bodies could disappear.

Room for new arrivals

Lufthansa is retiring these aircraft because it sees extremely weak demand on the near-term horizon. However, looking out just a few years, it's very unlikely that Lufthansa will want to keep its long-haul fleet more than 40% smaller than its 2019 size -- since the retirements include dozens of jumbo jets, the impact on capacity would be even greater than 40%.

Instead, Lufthansa is making room to start accepting deliveries of new wide-body jets from Boeing and Airbus again, albeit at a measured pace. That's particularly good news for Boeing.

Lufthansa has 27 outstanding wide-body orders with Airbus, all for the A350-900. However, even before the pandemic, those orders stretched all the way to 2027. By contrast, it has 40 wide-body orders with Boeing, split evenly between the 777-9 and 787-9 models, all due by 2025, though the timing is negotiable.

A rendering of a 787-9 Dreamliner in the Lufthansa livery

Image source: Lufthansa.

Considering the number of aircraft retirements Lufthansa is planning, it seems like there will be room in its fleet for all of these Boeing wide-bodies by 2025 or soon thereafter. That's particularly true for the 400-seat 777-9, which is the natural -- and vastly more efficient -- replacement for the 747-400 and A380 jumbo jets that are being retired.

Desperately needed orders

Over the past six months, Boeing has taken a hatchet to its production plans for the 777 and 787 jet families, as exceptionally weak demand has driven a slew of order deferrals. By next year, Boeing will have slashed production of both aircraft families by more than 50% from pre-pandemic levels.

The U.S. aircraft manufacturing giant clearly can use every bit of business it can get, especially when it comes to lucrative wide-body sales. That would make a program of accelerated wide-body retirements at Lufthansa welcome news for Boeing, as it would keep deliveries of the 787-9 and 777-9 scheduled for the 2022-2025 period on track -- at least for now.