Cost cuts cannot compensate for falling yields.
More savings must be made at Lufthansa or it risks being pushed into a “dangerous red zone”, the airline’s board members have told staff.
The group faces rising costs such as employees’ wages, airport fees and air traffic control charges. Average yields fell by more than 3% in 2014 and cost cuts could not compensate, a letter by Lufthansa board members Bettina Volkens and Karl Ulrich Garnadt reads.
“The bottom line is that these twin trends will take us into the dangerous red zone if we do not take action to correct them,” the letter says.
“The competition knows our cost position and knows that this is an area where we are vulnerable. […] Our cost level is now 30 to 40% higher than that of our direct competitors such as easyJet or Turkish Airlines.”
Lufthansa is planning to expand its regional airline Eurowings as a budget carrier is negotiating with staff to cut costs on those Lufthansa-operated routes that are popular with tourists flying economy.
[image courtesy Lufthansa Group]