German airline Lufthansa will speed up cost cutting to try to boost productivity at its low-cost Eurowings subsidiary as it battles to defend market share in a competitive European market, chief executive Carsten Spohr has said.
“After quick growth in recent years we will first and foremost reduce complexity and costs (at Eurowings),” Mr Spohr said in an interview with German weekly magazine Der Spiegel.
“That’s why we have switched growth to zero. That is an absolutely rational step in an industry with high overcapacity.”
The poor margins at Eurowings compared with sector rivals were cited by the group as a big reason for a profit warning last week. Eurowings’ revenue was also forecast to fall sharply in the second quarter.
The move saw the airline group’s shares plunge 11% last Monday, dragging down rivals across the sector. Asked about consequences for jobs, Mr Spohr said Eurowings would retain a strong position within airports such as Frankfurt, Munich, Zurich and Vienna.
This would allow Lufthansa to continue offering Eurowings employees pay and social standards above sector averages, Mr Spohr said. Lufthansa is due to hold a capital markets day for investors on Monday.
It was reported on Thursday that Lufthansa faces potential strikes during the busy summer travel season, adding a fresh headache for the German carrier just days after its profit warning.
The UFO cabin-crew union will hold ballots on walkouts at Lufthansa’s Eurowings and Germanwings units after pay talks broke down amid a push for cost cuts, union officials said. Strikes could start in July and be widened to include walkouts at the main Lufthansa airline.