Austrian marks 15 years in Lufthansa Group: financial stability, but need for fleet modernisation
Austrian Airlines (AUA) has been part of the Lufthansa Group for 15 years.
The sale by the Austrian government in Sep-2009 was prompted by the 2008 global financial crisis, which exacerbated a period of loss-making by its national airline.
Lufthansa's ownership has given AUA a more financially secure footing, and it reported positive operating profits from 2013 until the COVID-19 crisis.
AUA's fleet has been simplified and its route network has been pruned. It recently started replacing its Boeing 777 and 767 widebody fleet (average age 25 years) with 787-9s - a modernisation programme that is due to last until 2028.
AUA's Airbus A320 family fleet has an average age of 19 years, so new narrowbodies must be next on the shopping list.
However, although the airline returned to profit in 2023, AUA's profitability remains somewhat brittle, and its parent will expect a suitable return on any further investment in new fleet.
- AUA's passenger growth has been slower than Lufthansa Group's since 2009, but it had a higher percentage of 2019 passengers in 2023 and in 1H2024.
- AUA is scheduled to reach 101% of 2019 seats for 2024, vs 87% for Lufthansa Group.
- AUA has trimmed its route network during its time in the Lufthansa Group
- In 2009 AUA's fleet of 94 aircraft included seven aircraft families. Today's fleet of 67 comprises five aircraft families and it is replacing its 777 and 767 widebodies with 787s.
- Its track record of profitability has improved under Lufthansa, but remains unexceptional.
AUA's passenger growth has been slower than Lufthansa Group's since 2009…
In 2009, the year of the acquisition by Lufthansa, AUA carried 9.9 million passengers. In 2023 it was 13.9 million.
AUA's 2009-2023 compound annual growth rate in passenger numbers was just 2.4% pa, compared with 3.4% pa for the Lufthansa Group overall.
Separating out the period 2009 to 2019, before the COVID-19 pandemic, AUA's passenger numbers grew at a CAGR of 4.0% pa.
This was lower than Lufthansa Group's 6.6% pa over that period.
…but it had a higher percentage of 2019 passengers in 2023…
However, AUA's 2023 passenger numbers were closer to their 2019 level, 95%, than the Lufthansa Group's, 84%.
AUA's 2019 passenger traffic as a percentage of 2019 was also higher than any other network airline in the group: Lufthansa was at 85%, SWISS at 89%, and Brussels Airlines at 82%.
Austrian Airlines: passenger numbers, 2009 to 1H2024
…and in 1H2024
In the first half of 2024 AUA reached 96.5% of its 1H2019 passenger numbers - higher than the 87.6% achieved by the group overall.
Among the individual airlines of the group, SWISS was just ahead of AUA, on 97.3%. In 1H2024 Lufthansa reached 87.7%, and Brussels Airlines 81.5%.
AUA is scheduled to reach 101% of 2019 seats for 2024, vs 87% for Lufthansa Group
Looking ahead to the full year 2024, AUA is scheduled to reach 101% of its 2019 seat capacity. This puts it ahead of all other network airlines in the group.
Lufthansa is scheduled to be at 80% of 2019 seat numbers, Brussels Airlines at 82%, SWISS at 90%, and Lufthansa Group at 87%.
AUA has trimmed its route network during its time in the Lufthansa Group
CAPA - Centre for Aviation databases go back to Sep-2011, two years after Lufthansa bought AUA, when AUA operated 136 routes, of which 111 were international European destinations.
In Sep-2024 its network consists of 113 routes, of which 95 are international within Europe. The total number is down by 23 routes, with a reduction of 16 in international Europe.
There have also been reductions in route numbers to the Middle East, Asia Pacific and Africa, and in the domestic market.
AUA's North American operation is the only part of the network where route numbers have grown: from three destinations in Sep-2011 to seven in Sep-2024.
The total of 113 routes in Sep-2024 is also down on the Sep-2019 total, which was 120.
Austrian Airlines: network (number of routes) by region in Sep-2011, Sep-2019, and Sep-2024
|
Destination region |
19-Sep-2011 |
9-Sep-2019 |
9-Sep-2024 |
|---|---|---|---|
|
Domestic |
5 |
4 |
3 |
|
111 |
99 |
95 |
|
|
N America |
3 |
7 |
7 |
|
7 |
4 |
4 |
|
|
6 |
4 |
3 |
|
|
4 |
2 |
1 |
|
|
Total routes
|
136 |
120 |
113 |
In 2009 AUA's fleet of 94 aircraft included seven aircraft families
When Lufthansa bought AUA in Sep-2019, Austrian Airlines had a fleet of 94 aircraft (including 41 aircraft operated by its subsidiary Tyrolean Airways), according to the CAPA - Centre for Aviation Fleet Database.
Its 10 widebody aircraft comprised four Boeing 777-200ERs and six 767-300ERs.
It had a mixed fleet of 31 narrowbodies (21 Airbus and 10 Boeing).
It also had a 53-strong regional aircraft fleet: 19 Bombardier DHC8s, 10 Bombardier CRJs and 24 Fokker F-28 turboprops.
Today's fleet of 67 comprises five aircraft families
AUA's fleet is smaller today, comprising 67 aircraft (as at 9-Sep-2024), with an average age of 17.7 years.
This is older than the Lufthansa Group average of 13.8 years, and the average for all European airlines of 13.7 years.
AUA's average fleet age is also older than its membership of the Lufthansa Group.
Soon after joining the Lufthansa Group, AUA's narrowbody fleet was simplified to consist only of Airbus aircraft, although it has since increased in number.
It now operates 39 A320 family aircraft, of which 35 are -ceo types. The average age of its Airbus narrowbodies is 18.9 years.
It has slimmed down and transformed its regional fleet, which now consists of 17 Embraer 195 regional jets, with an average age of 13.1 years (the youngest part of its fleet).
Austrian Airlines* fleet by aircraft production group, 2009 to 2024
It is replacing its 777 and 767 widebodies with 787s
AUA has recently started the modernisation of its long haul fleet.
Its first two Boeing 787-9s began operations in Jun-2024, now flying alongside three 767-300ERs and six 777-200ERs.
It aims to replace its remaining 777s and 767s - both types with average ages of over 25 years - with Boeing 787-9 Dreamliners by 2028.
…and also aims to renew its short haul fleet
AUA CEO Annette Mann has confirmed that the airline also aims to renew its short haul fleet.
No precise time frame has yet been given for this, but Ms Mann said that AUA aims to renew half of its fleet by 2030.
She noted during her attendance at the IATA AGM in Jun-2024 that there are two options for the airline, either "switching to new A320neos or switching completely to Boeing 737s". A decision, she acknowledged, remains in the hands of Lufthansa Group and its decisions on aircraft deployment.
Its track record of profitability has improved under Lufthansa, but remains unexceptional
Austrian Airlines was frequently loss-making in the years before its acquisition by Lufthansa, reporting operating losses in 2005, 2006 and 2007.
Losses widened in 2009, most of which was before the completion of the deal, before narrowing in 2010 to 2012.
AUA achieved a positive operating result in 2013 and remained in the black from then until 2019, before red ink returned in 2020 to 2022.
In 2023 AUA achieved an adjusted EBIT of EUR53 million on revenue of EUR2346 million, at a margin of 5.4%.
This margin was higher than in any year since before its purchase by Lufthansa. It was also better than Brussels Airlines' 3.4% and Lufthansa's 5.3% in 2023.
However, it was well below the 7.2% average for the group's passenger airlines, and below Eurowings' 7.9% and SWISS's 13.7% margins.
It was also in the bottom third of the margin ranking of 25 leading European airline brands.
See related CAPA - Centre for Aviation report: European airline margins 2023: ultra LCCs Pegasus and Ryanair at the top
On the occasions when AUA's margin has been positive over the past 15 years, it has typically been low single digits.
In 1H2024 AUA's 1H2024 result was adversely affected by industrial action and increased MRO costs.
Its adjusted EBIT was a loss of EUR62 million, on revenue of EUR1,070 million, at a margin of -5.8%.
This margin was better than Eurowings' -7.0% and Brussels Airlines' -6.9%, but below the -2.5% average for the group's passenger airlines, and Lufthansa's -5.6%.
SWISS achieved a positive adjusted EBIT margin of 9.3% in 1H2024.
As Ms Mann said in a recent interview, "we need to be competitive and future-fit", which means "being financially healthy".
Austria is a high-cost environment…
AUA's sale to Lufthansa has ensured its survival, and provided it with the benefits of being part of a large group with network efficiencies.
However, its 15 years as part of the Lufthansa Group have yielded only slow progress in fleet modernisation and financial performance.
Vienna (and Austria more broadly) is a high-cost environment for aviation (as is Germany). Labour costs, together with airport charges and aviation taxes, are a heavy burden.
AUA CEO Annette Mann has called on the Austrian government to take "urgent measures" to strengthen the nation's competitiveness, citing "high location costs" as a particular challenge.
…but AUA needs better financial returns to justify more capital investment
When the updating of its widebody fleet is complete, AUA's narrowbody fleet will have an average age of around 23 years and will be in pressing need of replacement.
Assuming that the parent company Lufthansa only allocates capital where it can achieve a suitable return, AUA will need to strengthen its track record of profitability.