LUFTHANSA IS TO STEP up cost-cutting measures and reduce its fleet, in an effort to combat an unforeseen stagnation in traffic growth which has left the German group with a significant drop in profits for the first half of the year.
Pre-tax profits amounted to DM119 million ($80 million), slightly above earlier profit warnings from the group, but some DM70 million down on year ago.
Lufthansa operations chief executive Klaus Nittinger admits that the carrier, which has raised capacity by 4.2%, has been surprised by the lack of traffic growth, particularly in the German market.
"The passengers just didn't turn up," he says, adding that, although premium traffic has remained strong, lower-yielding passengers have been enticed away by cut-price offers on other airlines.
Lufthansa also blames part of the decline on the impact of the disastrous fire at D_sseldorf Airport earlier this year.
Overall seat-load factors have dipped by 1.8 points, having come close to 70% a year ago.
"The name of the game is load factor. If we can't achieve our target load factor, then we have a problem," says Nittinger.
In response, the group has announced that it will reduce its long-range fleet by two aircraft, and its short- and mid-range fleet by three aircraft for the next two years. This will be achieved by reshuffling the delivery schedules of aircraft on order.
Two Airbus A310s, previously earmarked for sale to the German air force before defence-budget cuts cancelled the deal, are to be retired early in 1997. Lufthansa also plans to sell off its entire fleet of seven Boeing 737-400s - including one now on lease to Turkey's SunExpress (Flight International, 28 August-3 September).
Nittinger says that job cuts are likely, but numbers have not yet been decided. The company has already released over 100 staff employed earlier this year.
The workforce actually rose by 1,400 in expectation of higher traffic, which, together with wage increases, sent labour costs up by nearly 8%.
Higher fuel costs also helped to take overall costs up by 5%.
Source: Flight International
