Lufthansa to cut thousands of jobs in pursuit of efficiency

[FRANKFURT] Lufthansa is expected to announce several thousand job cuts on Monday (Sep 29) at the airline’s first company-wide capital markets day in six years, two sources close to the matter said, as it seeks to reassure investors of its commitment to efficiency.

Shares in Lufthansa, Europe’s largest airline by sales, rose 3.4 per cent to their highest level in more than three weeks after Reuters reported the planned cuts. They were up 1.7 per cent at 1423 GMT.

Analysts and investors have for the last two years criticised Lufthansa for its inability to cut costs and grow its core businesses after it delayed a target of achieving an 8 per cent operating profit margin by 2025.

The group had two profit warnings in 2024 and promised investors it would implement an ambitious turnaround programme. It announced the cuts to some employees earlier on Friday.

“All this will require us also to become leaner in admin because we cannot afford to maintain our work at the cost that we have now because we don’t have the margins to invest,” chief executive Carsten Spohr told staff in a town hall event, excerpts of which were seen by Reuters.

“And in our industry, without modern technology, you have no chance.”

Exact number of redundancies unclear

The airline group intends to reduce its administrative staff by 20 per cent in the coming years, the two sources said, although the exact number of redundancies is being determined.

The sources spoke on condition of anonymity because of the sensitivity of the matter. The company has said its turnaround is progressing. But labour challenges continue, with an ongoing dispute over pensions set to overshadow Monday’s Capital Markets Day in Munich. A pilot strike remains a possibility.

Lufthansa declined to comment.

SEE ALSO

Any redundancies would affect the whole group, not just the core airline, a third source with knowledge of the talks said.

Analysts said they expected the market would continue to put pressure on Lufthansa to show it can build a more efficient group.

“Despite having fewer planes, and even less flying activity, than in 2019, the airline business employs 7 per cent more people,” Bernstein said in a note focused on the airline’s Capital Markets Day.

Can it leverage new German operations?

Much of the airline’s remaining turnaround hopes are pegged to its ability to leverage two of its new German operations – Discover and City Airlines.

Lufthansa Classic’s labour agreements are inflexible, outdated and expensive, analysts say, whereas contracts for employees in the newer subsidiaries are easier to manoeuvre, according to a source close to the deal.

Increased flexibility will allow the group to move resources away from less profitable subsidiaries, executives told Reuters, to lower-cost options.

Convincing shareholders and analysts of progress is likely to remain a challenge, analysts said.

Lufthansa should focus on what is immediately in front of it rather than mid-term targets, said Ruairi Cullinane, an analyst with RBC.

“Analysts may also look for assurance that Lufthansa is still on track for its 2025 guidance for a significant increase in adjusted EBIT,” he told Reuters. REUTERS