Deutsche Lufthansa AG (LHA), Europe’s second-biggest airline, said it will hold passenger capacity steady this year and won’t update its intercontinental fleet until a 1.5 billion-euro ($2 billion) savings plan is completed.
Seating will increase by a “maximum” of 4 percent annually in 2013 and 2014 as unprofitable routes are scrapped, Carsten Spohr, the head of Lufthansa’s main-brand passenger operations, said in a letter to employees.
“The number of aircraft we have will therefore not increase before 2014, contrary to our previous plans,” Spohr wrote. Lufthansa won’t order a successor to the long-range Airbus A340 airliner used on intercontinental flights until cost-saving efforts “begin to bear fruit.”
Operating profit at the Cologne, Germany-based company’s Lufthansa division tumbled 56 percent to 168 million euros last year as fuel costs and slowing economic growth weighed on margins. The unit will account for 900 million euros of the total 1.5 billion-euro savings program, Spohr said in the letter sent to employees on April 20.
Lufthansa fell as much as 4.1 percent to 9.47 euros, the lowest intraday price since Jan. 18, and was trading down 3.9 percent at 11:38 a.m. in Frankfurt. That pared the stock’s gain this year to 3.4 percent.
Other reorganization measures include scaling back the six plane-model groups used on European routes to four and combining the LH Direct Services unit with the Germanwings operation for short-haul flights, Spohr said.
“Everything will remain just as it is for customers -- there is Lufthansa and Germanwings,” Andreas Bartels, a Lufthansa spokesman in Frankfurt, said by telephone. “But duplicated functions such as bookings control, route planning and ticketing can be merged behind the scenes to save money.”
Operating profit this year will be in the “mid-three- figure million-euro range,” versus the 820 million euros posted in 2011, Lufthansa said in March, when the airline said it was considering a capacity freeze.
The company also owns Austrian Airlines, which reported an operating loss of 62 million euros in 2011, and Swiss International, which had operating profit of 259 million euros.
