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Lufthansa to launch big cost cuts: company

Lufthansa to launch big cost cuts: company
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First Published: Thu, Jul 16 2009. 03 12 PM IST
Updated: Thu, Jul 16 2009. 03 12 PM IST
Frankfurt: Lufthansa, the leading German airline, is to make big extra cost cuts to save one billion euros ($1.4 billion) per year from 2011, a spokeswoman said on Thursday.
Spokeswoman Claudia Lange gave substance to a report earlier in the day by the business daily Handelsblatt which said that the plan, dubbed “Climb 2011,” would focus on passenger transport activities, which have slumped amid the global economic downturn.
“Our passenger costs must fall,” she told AFP, adding that details would be released in the coming weeks.
A letter sent by Lufthansa’s new chief executive Christoph Franz to staff warned that higher fuel costs and falling passenger numbers posed a serious threat and said: “This situation is forcing us to act.”
“Air traffic is mired in the worst crisis in its history,” and the German carrier expected it to last longer than previously anticipated.
After posting a first-quarter loss, Lufthansa’s first-half results “will show that this negative trend is continuing,” Franz said.
“Unless market conditions change, our losses will increase significantly in the coming year owing especially to the rise in fuel prices,” he added.
“We must now make ever more determined efforts to counteract the trend,” he stressed, adding: “We have no other alternative but to resort to painful measures.”
An airline analyst quoted by Dow Jones Newswires expressed doubt however that Lufthansa would reach its cost-cutting target owing to likely strong resistance from trade unions.
The analyst noted that the Cockpit union which represents pilots had already objected to the airline’s cost-savings plans.
In mid June, the carrier said slumping passenger and freight traffic would force it to take additional measures to avoid posting a full year loss.
Lange told AFP that the roughly 2,000 administrative posts in the airline’s passenger division would be cut by 20% in the medium term.
“Our suppliers - within and outside the Group - must do their share,” Franz also said without elaborating.
The airline would reappraise all its operations, including “structures, projects and processes,” the new chief executive vowed.
Lufthansa is trying to take over two European carriers at the moment, Austrian Airlines and the Britain’s BMI.
The bid for Austrian Airlines has become less certain however, because Lufthansa has failed to address competition concerns expressed by the European Commission, which must approve the deal.
Lufthansa shares gained 0.88% to 9.17 euros in morning trading on the Frankfurt stock exchange, while the DAX index of leading stocks was slightly higher overall.
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First Published: Thu, Jul 16 2009. 03 12 PM IST