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The Lufthansa Group has told shareholders it will shift the focus of its Eurowings low-cost carrier to short-haul operations as part of a turn-around plan.
The group made the announcement at its Capital Markets Day and makes up part of its strategy to return the LCC to profitability, which also includes scrapping plans to integrate Brussels Airlines with the German low-cost subsidiary.
Group revenue was up 6 per cent in 2018, but adjusted EBIT fell 9 per cent, namely due to losses at Eurowings, according to Lufthansa. The group saw high costs throughout the year during the integration of aircraft acquired from the collapse of Air Berlin, along with higher fuel and compensation costs.
As a result, Lufthansa will transfer long-haul flights currently operated by Eurowings to the Network Airlines to instead focus on its short-haul network. The carrier is also aiming for “less complexity and higher productivity” by reducing itself to a single Air Operator’s Certificate (AOC) in Germany.
Lufthansa is targeting a 15 per cent decrease in Eurowings’ costs by 2022. The news comes after the group issued a profit warning last week, its second in as many months.
Eurowings operates a number of long-haul flights from Germany to destinations such as New York, Miami and Fort Myers in the US, as well as Thailand. It began offering business-class seats on some long-haul services last summer.
Furthermore, a new turn-around plan for Brussels Airlines will be announced later this year, while the Network Airlines will use “innovations in sales and distribution” to increase revenue.
Last month, Lufthansa Group announced it would raise its distribution charge to £14 per segment for fares booked outside of its direct and NDC channels.
Chairman and CEO Carsten Spohr commented: “With the airlines in our group we are excellently positioned in our home markets, which are among the strongest in the world. Our group’s service companies are also world leaders in their fields. We want to translate this market strength even more consistently into sustainable profitability and value creation. And it is to this end that we are presenting concrete actions today which will enhance our efficiency and generate value for our shareholders. Because we don’t just want to be number one for our customers and our employees; we want to be the first choice for our shareholders too.”