Thursday July 16, 11:51 AM
Lufthansa springs new big cost cuts
FRANKFURT (AFP) - Lufthansa (Xetra: 823212 - news) announced big extra cost cuts on Thursday based on shedding office staff to save one billion euros (1.4 billion dollars) per year from 2011.
Spokeswoman Claudia Lange gave substance to a report earlier in the day by the business daily Handelsblatt saying 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 carriers now expect it to last longer than previously anticipated.
The International Air Transport Association (IATA) said in Geneva that its members do not expect any improvement until the end of the year, owing also to the swine flu pandemic.
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."
In mid June, the carrier said slumping passenger and freight traffic would force it to take measures to avoid posting a full-year loss.
Lange told AFP that of roughly 2,000 administrative posts in the airline's passenger division, 20 percent would be cut 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 operations, including "structures, projects and processes," the new chief executive vowed.
IATA said its latest airline survey found that "even the optimistic respondents don't see significant recovery before the fourth quarter of this year and others not until early 2011."
The group said last month that airlines were expected to lose nine billion dollars this year.
Lufthansa is meanwhile trying to take over two European carriers, Austrian Airlines (Vienna: 675054.VI - news) 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 1.21 percent to 9.20 euros in midday trading on the Frankfurt stock exchange, while the DAX index (Xetra: news) of leading stocks was 0.22 percent higher overall.
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