Lufthansa to Cut Eurowings Costs, Fly Short-haul Only

June 24, 2019

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Lufthansa Group has outlined its plans to return its Eurowings budget carrier to profitability, with a focus on short-haul flying.

Lufthansa to Cut Eurowings Costs, Fly Short-haul Only

As part of the pivot to short-haul, Lufthansa will take over commercial responsibility for Eurowings’ long-haul services, the airline said in an investor and analyst briefing.

Other changes include closer alignment with the group's network airlines and the abandonment of the planned integration of Brussels Airlines into Eurowings. A turnaround plan for Brussels Airlines will be announced in the third quarter.

Cost reductions include a target of a 15 percent drop in cost per available seat km (CASK) to be reached by 2022. Lufthansa said it will do that partly by reducing complexity and increasing productivity at Eurowings by flying one aircraft type, the Airbus A320 family.

It will also reduce the number of air operator's certificates (AOCs) it operates under to just one in Germany.

Network airlines Austrian, Lufthansa and Swiss will also contribute a continuous reduction in unit costs of between one and two percent annually.

Lufthansa chief executive Carsten Spohr said he wants to translate the group's market strength more consistently into sustainable profitability and shareholder value creation.

“And it is to this end that we are presenting concrete actions today which will enhance our efficiency and generate value for our shareholders,” Spohr said.

“Because we don’t just want to be number one for our customers and our employees, we want to be the first choice for our shareholders too.”

Lufthansa said that in future it will distribute 20 to 40 percent of group net income to shareholders, and raise medium-term free cash flow to at least EUR€1 billion (USD$1.14 billion) a year.