Kevin O'Toole/FRANKFURT
LUFTHANSA chairman Jurgen Weber has promised a renewed attack on costs throughout the group, warning unions that there will be tough decisions to make as they go into this year's round of wage negotiations.
Speaking at the German group's annual press conference, Weber announced a drive to cut unit costs by 20-25% as part of what he calls a "continuous maintenance programme for our company". The headline target is to wipe DM1 billion ($650 million) from costs by the year 2001.
"Bold decisions and cuts are necessary, and some of the measures that have to be taken will be painful," he warns, promising that "every single cost" in the group will be reviewed. He says that forecast traffic growth of 5-7% will have to be carried out with only a "marginal increase" in the workforce and that "-changes in the existing staff pay structures are essential". The Lufthansa chairman adds that this will be discussed in the "forthcoming round of pay negotiations". These talks usually end by around September.
Although the group's net profit rose slightly - to DM756 million - over 1995, its first year outside state control, finance director Klaus Schlede appeared to dampen down any expectations of a big improvement this year. The goal is to achieve earnings "comparable to the 1995 figure", he says.
Much of the pessimism comes from the effect of exchange-rate losses, which the group estimates were responsible for DM450 in lost turnover. The strength of the deutschemark depressed passenger yields by 2%, despite a modest rise in the number of business travellers carried.
The worst-affected by the exchange rate was the newly independent Lufthansa Cargo operation, which made a "disappointing" return of only DM20 million on sales of DM3.3 billion. Currency losses wiped DM200 million from sales and yields were down by 4.6%.
Lufthansa has also released its first-quarter results, which show the group trimming its loss to DM49 million, although analysts remain concerned about a 6.6% rise in costs against growth in group costs of 5.8%.
Source: Flight International
