Europe LCCs: Eurowings’ turnaround plan short on margin & CASK

Lufthansa Group's Capital Markets Day on 24-Jun-2019 included a significant presentation on the restructuring of its point-to-point airline division, Eurowings.

Loss-making in 2018, the airline's outlook for 2019 was downgraded by Lufthansa in a Jun-2019 profit warning from break even to a bigger loss than last year.

The turnaround plan for Eurowings includes transferring its long haul routes into the group's network airlines division, refocusing Eurowings on profitable short haul routes in its core markets, and no longer integrating Brussels Airlines. There is also a detailed plan of measures to achieve a significant reduction in unit cost by 2022.

Its plan looks feasible, but the challenges are significant.

As data presented in this report illustrates, Eurowings is a long way behind the profit margin of most other LCCs in Europe. Even if its plan is successful, it will only achieve break even in 2021.

Moreover, CAPA analysis shows that its 2022 unit cost target is still above rival LCCs such as Vueling and easyJet and significantly higher than the levels achieved by ultra LCCs Ryanair, Wizz Air and Pegasus.