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LUFTHANSA

Germany’s Lufthansa to cut up to 800 jobs at Austrian Airlines

Lufthansa on Thursday said it would slash 700 to 800 jobs at its Austrian Airlines subsidiary, more than a tenth of the workforce, as it strives to cut costs in the face of growing competition.

Germany's Lufthansa to cut up to 800 jobs at Austrian Airlines
An Austrian Airlines flight taking off from Frankfurt. Photo: DPA

Lufthansa CEO Carsten Spohr said the job cull would help the group achieve “savings of 90 million per year” by 2021. In a separate statement, Austrian Airlines said the job cuts would take place over the next two years.

Thursday's announcements came as Lufthansa faced a major strike by German cabin crew on Thursday, the first of a two-day walkout that has led to 1,300 flight cancellations.

READ ALSO: Travel chaos in Germany as 180,000 passengers hit by Lufthansa strike

The small carrier was locked “in the mother of all battles” in Vienna with low-cost rivals Ryanair and Wizz Air, Spohr told reporters in a conference  call after announcing a rise in the group's third-quarter revenues.

News of the jobs cull sent shares in Lufthansa soaring by 8.8 percent to 17.6 by 12:40 pm, putting it at the top of the blue-chip DAX index in  Frankfurt.

“We have to reposition ourselves to be able to survive in the brutal  competition with budget carriers,” Austrian Airlines boss Alexis von Hoensbroech said in a separate statement.

The planned job cuts amount to a loss of 700 to 800 full-time jobs by the end of 2021, out of a total workforce of 7,000 people, the statement added.

Most of the job losses will come from not replacing departing workers.

The Lufthansa group — which also includes Eurowings, Brussels and Swiss airlines — earlier on Thursday said it was on track to meet its full-year outlook despite a “challenging market environment”.

The carrier booked a net profit of 1.15 billion between July and September, up four percent year-on-year.

But the jump was mainly thanks to accounting effects, with the group's operating profit adjusted for some one-off items, actually falling eight  percent to 1.3 billion.

Lufthansa said it had faced higher than expected fuel costs that were only partially offset by cost-cutting efforts.

READ ALSO: Why are budget airlines getting more expensive in Germany?

And like rival airlines it was grappling with “a general slowdown in the global economy”, it said in a statement.

Revenues for the period were up two percent to 10.2 billion.

Lufthansa's chief financial officer Ulrik Svensson said it was “vital” that the group took action “to further reduce our costs”.

Aside from the job losses at Austrian Airlines, the group is hoping that a renewed focus on the Vienna hub and aircraft replacements will further trim costs at the struggling subsidiary.

Looking ahead, Lufthansa said it was on track to meet its 2019 goals.

It continues to expect adjusted earnings before tax and interest of 2.0-2.4 billion while revenues are predicted “to rise by a single-digit percentage amount”.

But it lowered its earnings outlook for Lufthansa Cargo, blaming “current  weak market demand”.

The group's total fuel costs for the year are expected to reach 6.8 billion, 650 million more than in 2018.

 

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LUFTHANSA

Niki straps in for turbulence as Lufthansa backs away from purchase

Austrian airline Niki faced insolvency and its planes being grounded on Wednesday as Lufthansa gave up on plans to buy it from bankrupt Air Berlin in the face of competition concerns from the European Commission.

Niki straps in for turbulence as Lufthansa backs away from purchase
A Lufthansa plane rolls past a Niki aircraft in Düsseldorf. Photo: AFP

“Lufthansa informed Air Berlin and its insolvency managers that it will pursue the planned transaction without the purchase of Niki,” the airline said in a statement.

Germany's second-largest carrier triggered bankruptcy proceedings in August after losing a cash lifeline from its biggest shareholder Etihad Airways.

Its aircraft were kept aloft by a 150-million-euro emergency loan from the German government while it negotiated the sale of its assets.

Meanwhile, Niki's aircraft have continued to fly as it is not subject to the same bankruptcy conditions as Air Berlin.

Wednesday's decision could pitch the airline into financial turbulence as it loses bridge financing from the German giant.

“We regret the Commission's decision on Niki very much,” the German government said in a statement.

“There are no alternative buyers for Niki available at the moment despite all the efforts of the insolvency managers… insolvency and grounding will be the consequence,” it added.

According to Vienna airport's website, four of five Niki flights scheduled for Thursday have been cancelled.

Air Berlin said in a statement Tuesday that prospective buyers IAG had withdrawn their interest in Niki, while there was also no workable offer from Thomas Cook, leaving Lufthansa as the group's only option for sale.

The European Commission said last week it had “deep competition concerns” about Lufthana's hoped-for buyout of 81 aircraft from Air Berlin's 140-strong fleet plus Niki for 210 million euros ($250 million).

Lufthansa had already offered to give up many of the precious takeoff and landing slots it originally wanted under the deal.

But “the Commission saw this step as unsatisfactory and signalled clearly that it could not allow taking over and integrating Niki into the Eurowings group,” Lufthansa's low-cost subsidiary, the firm said.

The German group also offered Wednesday to give up further slots belonging to Air Berlin subsidiary LGW.