Latest quarterly data - Lufthansa adopts cost-cutting measures due to expensive strikes.
Following the pricey strikes in the beginning of the year, Lufthansa is now focused on cutting back. Despite strong bookings for the summer, CEO Carsten Spohr revealed on Tuesday that they will be hiring fewer new employees in the administration of the core Lufthansa brand than initially projected. Spohr declared at the unveiling of the first-quarter figures in Frankfurt that cost reductions must be made in all areas that don't straight-up impact customers.
The company decided to manage with 20% fewer management staff and administrative staff compared to 2019. Having to recoup the expensive strike costs is also contributing to the decision.
The tickets for Lufthansa Group companies like Swiss, Austrian, Eurowings, and Lufthansa will be in short supply and expensive this summer. Spohr doesn't envision any more price hikes, but more of a leveling off of prices. He assuredly states: "This will be another extremely successful travel summer." Bookings for the warmer half of the year are up 16% compared to 2023, promising "highly profitable growth." The new "Allegris" cabin interior, debuting on the first long-haul plane on May 1st, will also contribute.
However, Spohr has ruled out a 2023-level operating profit for 2024. In early April, Lufthansa's top brass reduced their profit target by half a billion euros due to the negative impact of the strikes and a decline in airfreight business. Instead of around EUR 2.7 billion in 2023, the projected operating result (adjusted EBIT) is only expected to hit EUR 2.2 billion in the current year. In the first quarter, the operating loss tripled to 849 million euros compared to the same quarter in 2022.
The fact that the Group can only fly 92% of their capacity from pre-pandemic 2019 due to strikes, delayed aircraft deliveries, and conservative capacity planning for the entire year is part of the reason for the lower profit projections. Spohr originally aimed for 94% capacity for the year.
The company estimates the strike costs at around 450 million euros. Of that, 350 million euros were already incurred during the first quarter, when their own ground staff and cabin crews, along with security personnel at numerous airports, went on strike.
On Tuesday, Spohr talked about a fresh wage deal with the pilots of the subsidiary Eurowings until the end of 2026, a deal made without any strikes. Contracts have now been signed for most of their employees. "There will be industrial peace for the following years," Spohr said with confidence. The Vereinigung Cockpit pilots' union verified the agreement in a key points memo.
Spohr spoke out against the European Commission for imposing conditions that would make the impending consolidation of European aviation more challenging. This refers to Lufthansa's planned acquisition of the Italian state airline Ita, on which the EU Commission will now make a decision by June 13th after extending the deadline.
The Lufthansa Group has until May 6th to handle any competition concerns via commercial concessions. The authority worries that Lufthansa Group would obtain a too-significant presence on specific routes and airports. Spohr made it evident that there's no "Plan B" for his company regarding the Ita takeover in the event of a negative ruling from Brussels. The goal is to provide a better offer for Italian customers on long-haul and short-haul routes. "It has to be lucrative for us."
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Source: www.stern.de
