Lufthansa cancels growth plans of low-cost subsidiary Eurowings

Eurowings Airbus A330/Foto: Lufthansa

The Lufthansa Group has cancelled the growth plans of its low-cost subsidiary Eurowings. In the current year, Eurowings’ flight offerings will remain at the previous year’s level, the Airline group announced in Frankfurt on April 30 when presenting the quarterly figures. Most recently, the Board of Management had had an increase of two percent in mind.

The evaporated plans are intended to help ensure stable flight operations. In 2018, Eurowings had to contend with many delays and flight cancellations due to the shortage of air traffic controllers and its own problems in the course of the Air Berlin takeover. Even in the first quarter of 2019, things were not really going well for Eurowings. The financial result before taxes fell to minus 256 million euros, another significant decline after a loss of 212 million euros in the first quarter of 2018.

Meanwhile, the rise in oil prices at Europe’s largest airline group is also putting more pressure on profits than expected. Fuel costs are expected to climb to 6.8 billion euros this year, estimates the Lufthansa Executive Board. In addition, the Lufthansa Group announced that “overcapacities, especially on short- and medium-haul routes within Europe” had “significantly burdened” the quarterly result. As a result, the Lufthansa Group as a whole was also flying low into the red due to lower ticket prices. The net loss rose from 39 million euros in the same period last year to 342 million euros. The group had already presented key data in mid-April.

Ticket prices to rise

However, ticket prices are expected to rise again in the next three months. For the year as a whole, the management expects the group’s sales to rise by four to six percent. Of the Lufthansa Group’s network airlines, only Swiss was able to generate a positive pre-tax result (EBIT) in the first quarter. But even there, profits declined: From 93 million euros in the first quarter of 2018 to 40 million euros for the first three months of 2019. Lufthansa reported a result of minus 101 million euros, after a profit of 111 million euros in the first quarter of 2018. At Austrian Airlines, the result fell from minus 73 million euros in 2018 to minus 99 million euros in the first quarter of 2019.

Sale of LSG Sky Chefs and fleet modernization resolved

The first quarter also saw a number of decisions on the future direction of the Group. The sale of the catering part  LSG Sky Chefs is being taken seriously. The Management Board has decided to prepare the sale process for the subsidiary. Lufthansa CEO Carsten Spohr can imagine selling the subsidiary as a whole or in parts. In the first quarter, LSG Sky Chefs doubled its operating profit year-on-year from one million to two million euros. The company not only serves passengers on Lufthansa flights, but also many other airlines.

In March, the Lufthansa Supervisory Board approved the purchase of 40 wide-body aircraft. 20 Boeing 787-9s and 20 additional Airbus A350-900s are to replace four-engined aircraft in the Lufthansa Group’s long-haul fleets, thereby reducing operating costs. Delivery of the new aircraft is scheduled between the end of 2022 and 2027. In addition, six of the 14 Airbus A380s are to be sold to Airbus and will leave the fleet in 2022 and 2023, as the Group confirmed when presenting its quarterly figures.

Sources: dpa, afp, Lufthansa

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