Deutsche Lufthansa AG yesterday announced plans to cut costs at its Austrian Airlines, Brussels Airlines and Lufthansa Cargo unit to revive profits, but faces a fresh challenge to its efforts with a cabin crew strike this week.
The German airline has reacted to tough competition from Ryanair Holdings PLC and EasyJet PLC by cutting costs and announcing a turnaround plan in June for Eurowings GmbH, which it said in the announcement is showing the first signs of success.
However, yesterday, the airline faced a new blow when cabin crew launched a two-day strike that is to result in the cancelation of 1,300 flights and affect 180,000 passengers. The costs of the strike could not yet be estimated, an airline spokesman said.
Trade union UFO has called for the walkout on what amounts to one in five of the carrier’s planned 6,000 flights yesterday and today as part of a dispute over pay and pensions.
In its bid to boost profits, Lufthansa said that it would seek additional annual cost savings at Austrian Airlines of 90 million euros (US$99.67 million) by the end of 2021 that would include staff cuts, closing decentralized bases to focus on its Vienna hub and standardizing its fleet.
A company source said the plan could involve the loss of about 500 jobs.
Lufthansa declined to comment.
Lufthansa shares, which have fallen 16 percent in the last year, jumped 6.5 percent after the cost-cutting plans were announced.
“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,” chief financial officer Ulrik Svensson said.
“We have resolved several additional measures to improve the performance of our only modestly profitable and even loss-making companies,” Svensson added.
Lufthansa said it would make changes to the route network at Brussels Airlines, streamline its administration and standardize its fleet.
The airline would cut the size of the fleet at Lufthansa Cargo, withdrawing all 10 Boeing Co’s MD-11 freighters by the end of this year and adding two Boeing 777Fs to the seven that it already uses.
AHEAD OF CONSENSUS
Lufthansa reported that quarterly adjusted earnings before interest and taxation fell 8 percent to 1.3 billion euros, ahead of average analyst forecasts for 1.2 billion euros, while revenue rose 2 percent to 10.2 billion euros, also ahead of consensus.
Slower growth at its competitors is helping to counter pricing pressures in Europe, it said.
The Eurowings plan is showing its first results and it should achieve a margin of 7 percent in the longer term, Lufthansa said.
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