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Lufthansa: the group is reorganizing to expand profits

A process to be launched in 2016

The management fusion of the four traditional companies Lufthansa, Austrian, Brussels Airlines and Swiss should contribute to adding 500 million euros in profit between now and 2019. This reorganization will be established right at the start of next year, while the short-haul operator Eurowings will keep building up to face the growing competition of low-cost companies.

Rédigé par Geneviève BIEGANOWSKI translated by Joséphine Foucher le Vendredi 18 Septembre 2015

Through internal restructuring, the Lufthansa group hopes to expand its profits by 500 million euros between now and 2019 - Photo : Lufthansa -
Through internal restructuring, the Lufthansa group hopes to expand its profits by 500 million euros between now and 2019 - Photo : Lufthansa -
After taking imposing measures with the 16 euros fees for any reservations via GDS and resorting to Frankfurt’s labor court to break the strike of German pilots, the group Lufthansa is pursuing its hardening up philosophy from inside through the reorganization of its teams, with the objective of bringing in half a billion euros in profit between now and 2019.

Indeed, Carsten Spohr, CEO, announced that the group’s organization will tightened by next year.

The outlines of the plan are known, such as the merging under the Eurowings umbrella of all the short point-to-point European airlines along with some long-haul flights, a measure to fight against the growing pressure of low-cost companies.

However, the changes will be most important on the company's traditional service.

In this way, Lufthansa, Swiss, Brussels Airlines and Austrian Airlines will all share the same boss. The task will be handed to the current Executive Director of Swiss, Harry Hohmeister, who will be the Master of Ceremony.

The whole management of the four companies will be regrouped into one single team - which should remove around one hundred senior executives from the one thousand currently working for the group throughout the world.

Major salary cuts

The other activities, such as cargo, maintenance, and catering will be managed separately, whereas Lufthansa’s current network Director, Karl Ulrich Garnadt, will be in charge of Eurowings’ low cost activity.

Will this restructuring, that will give way to substantial savings through important salary cuts, be able to convince the pilots Union, Vereinigung Cockpit, to also lower their demands?

Today, after the 13th strike movement since the beginning of the year, the pilots accepted to return to the negotiating table to discuss pre-retirement benefits.

But the job cuts linked to the development of Eurowings remain the conflict’s main stumbling block.

Within the other companies, particularly at Swiss, the anticipated loss in autonomy also worries Unions. Will Carsten Spohr be capable of imposing his rules?

It is understandable for the personnel of the group’s companies to be taken aback by the CEO’s statement. Indeed, he simultaneously indicates wanting to add half a billion euros in profits by cutting the salaries of a hundred senior executives, while the objective of 1.5 billion in operating profit (EBIT) will be reached this year, despite the strikes.

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