Lufthansa will halt fleet expansion over the next three years as part of plans to improve annual profits by over EUR€1.5 billion (USD$2 billion), according to a letter sent by a board member.
Chief executive Christoph Franz has said the three-year cost-cutting programme is necessary to improve margins and finance investment in planes in the face of a weakening economy, high fuel costs and increased competition from low-cost carriers.
Lufthansa German Airlines, which does not include Swiss or Austrian Airlines, would account for EUR€900 million of the targeted EUR€1.5 billion improvements, board member Carsten Spohr said, with plans to cut staff costs and negotiate lower charges at airports.
“We will not go to the Supervisory Board with the proposal of selecting and ordering a modern intercontinental fleet until the above mentioned measures begin to bear fruit,” Spohr wrote in the letter to staff.
Spohr said in the letter that Lufthansa German Airlines would not increase the amount of seats available in 2012 and would restrict capacity growth to a maximum of 4 percent in 2013 and 2014.
Lufthansa had cut its expansion plans in March, saying it now expected to add only 2 percent more seats at its airlines, including Austrian Airlines, Swiss and Brussels Airlines. It already cut its original 9 percent plan in October.
Lufthansa’s Roland Busch, responsible for finance and HR at the Passenger division, said on Thursday night at an event in Frankfurt that increasing fuels costs and airport fees meant Lufthansa had to keep introducing cost-cutting programmes.
“Despite all our efforts, it feels like we end up only reducing losses, instead of improving profits,” he said.