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European carriers shed excess weight - Austrian, SAS and Lufthansa Cargo announce cuts

2-Feb-2009
Lufthansa CEO, Wolfgang Mayrhuber
Lufthansa CEO, Wolfgang Mayrhuber
  • Austrian Airlines announces EUR225 million target in "crisis" cost savings;
  • SAS completes the sale of airBaltic and Spanair stakes;
  • Lufthansa Cargo aims to cut working hours amid big downturn in demand.

More European carriers have announced major cutbacks to their operations and structures in a bid to stave off the worst effects of the global economic crisis, among them Austrian, SAS and Lufthansa Cargo.

Austrian Airlines, soon to be a member of the Lufthansa Group, has unveiled a EUR425 million cost-cutting initiative to be implemented by 2012. It includes a short-term "crisis package" targeting EUR225 million in cost savings designed to secure liquidity, to compensate for the anticipated 15% reduction in revenue in 2009. Capacity reductions are expected to produce a reduction in variable costs of approximately EUR115 million.

A further capacity reduction of 5% is to be implemented, resulting in a 10% capacity reduction in 2009. Austrian' COO, Dr Peter Malanik, stated, "the global economic crisis has now reached all markets, demand is collapsing and the outlook offers very little reason to be optimistic. Even after closing, we retain sole responsibility for our own actions in every regard as an airline in the Lufthansa Group, and must overcome the current crisis single-handedly as a result".

SAS Group, also a potential future Lufthansa Group member, has meanwhile completed the sale of its 47.2% stake in Latvian regional carrier, airBaltic, to the management of airBaltic. Payment of EUR16.4 million for the Latvian carrier has been received.

The SAS Group has also reached a definitive agreement with a group of investors from Catalonia, led by the Consorci de Turisme de Barcelona and Catalana d'Inciatives, for the sale of a 80.1% stake in subsidiary, Spanair, for a cash consideration of just EUR1. SAS will remain as a 19.9% minority shareholder and act as its industrial partner to assist in the implementation of a strategic plan. SAS will be glad to close the books on Spanair - the Group is expected to incur a "significant negative impact from the sale transaction and Spanair's 2008 financial results - a loss of EUR458.3 million.

Meanwhile Lufthansa - seemingly the white knight for all cash starved European flag carriers - has revealed some problems of its own. CEO, Wolfgang Mayrhuber, stated the airline could not rule out reducing working hours for more employees, after its cargo unit announced planned cutbacks, although there are no definitive plans for other business areas at present.

Lufthansa Cargo Chairman, Carsten Spohr, stated, "demand for airfreight capacities has fallen sharply worldwide. The production halt in diverse industries has hit the entire international logistics business and especially the air cargo industry".

Latest Airports Council International traffic data for Dec-08 showed 22.8% and 13.1% reductions in international and domestic freight volumes at European airports. International and domestic passenger numbers in the month fell 6.5% and 12.3%, respectively.

If monthly figures like these continue for much longer, more European carriers will be quickly forced into even more drastic cutbacks and/or into the arms of stronger airlines.


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