Austrian Airlines is taking severe cost-cutting measures from 2021 to assure it return to profitability. Between 700 and 800 staff will be made redundant as the airline needs to save EUR 90 million annually after having given a profit warning for 2019 and 2020.
Austria’s national carrier – part of Lufthansa Group – has been feeling the pressure at its Vienna hub from ‘a glut of low-cost airlines’. These include easyjet, WIZZ, LEVEL and Ryanair through its Austrian subsidiary Lauda. Competition had resulted to a drop in ticket prices and yields which without measures will severly impact the airline’s sustainability.
Austrian CEO Von Hoensbroech shared this graphic on Twitter, showing the ‘invasion’ of low-cost airlines at Vienna with based aircraft.
The 90 million annual savings will start in 2021 through the Process Efficiency PE20-program. Cost-cutting measures are implemented on the corporate side of Austria’s business operations. Job cutbacks will be made via staff fluctuation, while efficiency programs should boost profit margins. At the end of September, headcount was 7.038 employees.
Long-term, Austrian will modernize and harmonize its fleet. Only last week, Austrian added the first of ten extra secondhand Airbus A320ceo’s to its fleet as replacement of the Dash 8-turboprops, but long-term the airline needs newer and more efficient equipment. A decision on replacing its older Boeing 767 and 777s is long overdue. Austrian says it is looking at bigger aircraft to improve unit costs.
Austrian’s CEO Alexis von Hoensbroech showed his fighting spirit when he said Austrian needs to stand up to the low-cost airlines and do everything to strengthen its position in Vienna. All of its aircraft will be stationed at Vienna Schwechat Airport, while regional airports will gradually be served by Lufthansa. The first service to be taken over by Lufthansa will be Salzburg-Frankfurt in December.
From January, Lufthansa’s low-cost airline Eurowings will wet-lease four aircraft in Vienna to open up new flights to Barcelona, Birmingham, Nuremberg, Rome, and Zadar.
Austrian will cut its own network by eliminating the loss-making seasonal service to Miami from November 8, while frequencies to Los Angeles will be reduced from seven to five times a week.
Austrian reported adjusted earnings for Q3 of EUR 17 million, down from 110 million last year despite a 6 percent increase in passenger numbers to 11.2 million. Revenues dropped 2 percent to EUR 1.696 billion. Higher fuel and maintenance costs increased expenditures by 4 percent to 1.679 billion.
Lufthansa Group: Q3 EBIT almost flat
Also today, Lufthansa Group announced its Q3 and nine months-results. The group reported an EBIT Adjusted of EUR 1.3 billion for Q3, slightly below its 1.4 billion result last year. Revenues were up 2 percent to 10.2 billion. Between January and September, EBIT Adjusted was down 30 percent to EUR 1.7 billion. Revenues were up 3 percent to 27.7 billion.
Network airlines Lufthansa, Austrian, and SWISS reported a nine month-EBIT Adjusted of EUR 1.6 billion, down from last year’s 2.1 billion. While business to North America remained strong, traffic and yields in Europe were under pressure due to continued pricing pressures. Cost-cutting measures only partly offset higher fuel and staff costs.
Lufthansa revenues were 3 percent up to EUR 12.237 billion, but EBIT Adjusted down 24 percent to 1.110 billion.
SWISS, which has shown the Group’s strongest growth in recent years, reported 11 percent lower nine months EBIT Adjusted of CHF 490 million, while revenues were one percent higher at 4.05 billion. Higher fuel and maintenance costs impacted revenues.
Low-cost airline Eurowings improved its Q3 results by posting EBIT Adjusted of EUR 169 million versus 122 million last year, but for the nine-month period still recorded a higher loss of EUR 104 million versus 98 million last year.
Update: in its financial report Lufthansa finally confirmed it has changed 14 firm orders for the Boeing 777-9 into options. The situation of these 14 aircraft has been unclear since 2017 when Lufthansa and Boeing presented different figures. After the revision 20 -9s remain as a firm order.