Lufthansa is aiming to make cost savings of €1.5 billion ($1.9 billion) every year until 2014 through a large-scale restructuring programme which will entail the "partial dismantling and reconstruction" of the entire group.
Chief executive Christoph Franz presented the three-year efficiency improvement scheme - named SCORE (synergy, costs, organisation, revenue and execution) - to the airline's staff this week.
Apart from slashing costs and reducing overheads "across all divisions and [group] airlines", Lufthansa wants increase co-operation between its carriers to avoid duplicated effort, wrote Franz in the company's internal employee newspaper "Lufthanseat" today.
Traffic in the European "neighbourhood", including services operated by Lufthansa, Austrian Airlines, Brussels Airlines, Germanwings, Swiss International Air Lines, as well as regional subsidiaries and partners, will be optimised, said Franz.
The group wants to streamline "massively" administration and centralise functions such as purchasing. In future, employees had to stop "thinking and acting according to their individual, segmented interests", he said.
In the face of growing competition from low-cost airlines in Europe and, in the long-haul market, from Emirates, Qatar Airways and Turkish Airlines, Lufthansa will need to go undergo deep structural change to improve its profitability, he said. Franz said in three years' time the airline will be radically different from its present incarnation.
Stefan Lauer, chief officer group airlines and corporate human resources, said the programme resembled less a restructuring of the current company and more a "partial dismantling and reconstruction".
Lufthansa has targeted savings of at least €1.5 billion annually until the end of 2014 through "permanent" structural change. The capital this generates will be required to finance new aircraft deliveries and products as well as future employment costs.
Franz plans to invest €9 billion over the next three years. In order to generate the required cashflow, however, the airline group had to change, he said. Its current financial position was not strong enough to meet these demands, he said.
Franz said he was not afraid to take "uncomfortable steps" and bring "apparently taboo subjects" to the table. "One thing is sure: we need to get out of our comfort zone," said Franz.
Concrete proposals will now be developed by a team headed by Josef Bogdanski and Jörg Beißel.
Source: Air Transport Intelligence news
