Lufthansa Announces Measures to Cut Costs in Group
Lufthansa recently announced that it would be cutting costs at its Group companies Austrian Airlines and Brussels Airlines in an aim to improve earnings.
“In an increasingly challenging market environment, it is more vital than ever that we consistently take every action within our influence and further reduce our costs,” Ulrik Svensson, Chief Financial Officer of Deutsche Lufthansa AG, said in the group’s third-quarter earnings announcement.
“We expect all Group companies to make their contribution here,” Svensson added.
Regarding Austrian Airlines, Lufthansa said that the airline will in future focus solely on providing air services from and to its Vienna hub. All its decentralized bases will be closed.
The aircraft fleet will also be standardized, with all the present Bombardier Dash 8 Q400s replaced by Airbus A320s by 2021. Productivity should also be further increased and personnel costs reduced.
According to Lufthansa, the actions announced for Austrian Airlines should generate additional annual cost savings of 90 million euros by the end of 2021.
On Brussels Airlines, Lufthansa said the airline should achieve an Adjusted EBIT margin of 8 percent in 2022. To this end, the route network will be realigned, while the organization will benefit even more from synergies with the network airlines in the future.
The administration of Brussels Airlines is planned to be comprehensively digitalized and streamlined. The standardization of the fleet as well as productivity and process improvements in flight operations is also expected to contribute to sustainable cost reductions.
Lufthansa also announced cutting costs at its cargo unit.
According to the Group, Lufthansa Cargo will have its aircraft fleet both standardized and downsized. To this end, all ten operational Boeing MD-11 freighters will be withdrawn by the end of 2020. At the same time, two further Boeing 777Fs will be added, resulting in a fleet of nine Triple Seven freighters.
“Lufthansa Cargo will also continue to focus on reducing its costs,” the Group said.
Lufthansa Group’s net result in the third quarter of 2019 increased 4 percent from the same period in 2018. However, its earnings before interest and taxes (EBIT) fell 13 percent.
The third-quarter earnings were supported by continued strong business on North Atlantic routes.
However, Lufthansa said it was taking actions to respond to the continued pricing pressures in Europe and general slowdown in the global economy. These actions will include a moderate growth of its Network Airlines’ 2019/2020 winter program and the reduction of capacity by Eurowings. The Network Airlines of Lufthansa Group include Lufthansa, Swiss and Austrian Airlines.