Lufthansa to cut more costs, as cabin crew start strike

BERLIN-Reuters

German airline Lufthansa announced plans on Nov. 7 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.

Lufthansa has reacted to tough competition from Ryanair and easyJet by cutting costs and announcing a turnaround plan in June for Eurowings, which it said on Thursday was showing the first signs of success.

But it faced a new blow on Nov. 7 when cabin crew launched a two-day strike that will result in the cancellation of 1,300 flights and affect 180,000 passengers. A spokesman said the costs of the strike could not yet be estimated.

Trade union UFO has called for the walkout on what amounts to one in five of the carrier’s planned 6,000 flights on Nov. 7 and Nov. 8 as part of a dispute over pay and pensions.

In its bid to boost profits, Lufthansa said it would seek additional annual cost savings at Austrian Airlines of 90 million euros ($100 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 around 500 jobs. Lufthansa declined to comment.

Lufthansa shares, which have fallen 16 percent in the last [2018] year, were up 1.2 percent in early Frankfurt trade.

“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,” said finance chief Ulrik Svensson.

“We have resolved several further measures to improve the performance of our only modestly profitable and even loss-making companies,” he said.

Lufthansa said it would make changes to the route network at Brussels Airlines, streamline its administration and standardize its fleet.

It will cut the size of the fleet at Lufthansa Cargo, withdrawing all 10 Boeing MD-11 freighters by the end of 2020, and adding two Boeing 777Fs to the seven it already uses.

Lufthansa said 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 revenues rose 2% to 10.2 billion euros, also ahead of consensus. 

On Nov. 7, it said slower growth at its competitors was helping to counter pricing pressures in Europe.

Lufthansa said the Eurowings plan was showing first results and it should achieve a margin of 7 percent in the longer term.