Deutsche Lufthansa AG, Europe’s second-largest airline, said it aims to cut administrative jobs by 20 percent under a 1 billion-euro ($1.41 billion) cost- savings program as traffic falls and fuel prices rise.
The carrier will eliminate about 400 positions by not replacing people who leave the company, and seeks to avoid firings “at present,” Amelie Schwierholz, a Lufthansa spokeswoman in Frankfurt, said today by phone. Most of the cutbacks will take place in Germany, particularly at the airline’s main Frankfurt hub, she said.
Lufthansa, which employed 108,123 people as of December 2008, has until now resisted trimming jobs as a response to the recession. The company said in February that it will “react with necessary measures” to maintain profit. Optimism that a decline in airline-industry traffic may have bottomed out faded as international passenger numbers fell 9.3 percent in May, the International Air Transport Association said today.
“This cost-saving program is ambitious, adequate and deep, and I like it,” said Juergen Pieper, an analyst at Bankhaus Metzler in Frankfurt with a “sell” recommendation on the stock. “They are addressing the structures.”
Lufthansa rose 16 cents, or 1.8 percent, to 9.26 euros in Frankfurt trading, the highest price since June 11th. That pared the stock’s decline this year to 17 percent.
Air France, British Airways
Air France-KLM Group, Europe’s biggest airline, eliminated 2,000 jobs in fiscal 2009 and will cut 3,000 more this year, Chief Executive Officer Pierre-Henri Gourgeon said in May. Third-ranked British Airways Plc is in talks with unions on reducing pay and eliminating almost 4,000 jobs following a 375 million-pound ($614 million) loss for the year ended March 31.
Lufthansa has “no other alternative but to resort to painful measures” as it scales back spending by the end of 2011, Deputy Chief Executive Officer Christoph Franz said in a letter to employees dated July 14.
The Cologne, Germany-based airline will show a “negative trend” continuing when it releases first-half figures following a loss in the first quarter, Franz said.
The company will announce details of the cost-savings program when it reports earnings on July 30, Schwierholz said.
Crude-oil prices, which are at about $61 a barrel in New York Mercantile Exchange trading, have increased 37 percent this year. Lufthansa said on June 24 that it’s increasing its fuel surcharge on domestic and European flights to 24 euros from 21 euros and raising the fee on South American, Asian and western- and southern-African routes.
Lufthansa reduced hours for 1,000 ground workers outside of its Frankfurt and Munich hubs in March and shortened workweeks for cargo-division employees in May. First-half group passenger traffic, measured as the number of travelers multiplied by the distance flown, fell 5.7 percent while freight tonnage dropped 20 percent, Lufthansa said on June 9.
The carrier may review its timetable for taking on 160 new aircraft, potentially delaying some deliveries beyond 2014, Schwierholz said. The airline said in June that it’s removing 25 planes from service this year.