Lufthansa Expands Cost Cuts as Fuel Expenses Rise

Deutsche Lufthansa AG, Europe’s second-biggest airline, is increasing efforts to cut spending this year to help counter rising fuel costs that are threatening earnings at its main passenger business.

The passenger unit, Lufthansa’s biggest, will fail to match last year’s results if oil prices remain at record levels, Chief Financial Officer Stephan Gemkow said today. The Cologne, Germany-based carrier is seeking 250 million euros ($389 million) in savings by expanding a hiring freeze and through measures such as curbing information-technology spending.
Record oil prices have made jet fuel the airline industry’s single biggest expense and pushed at least 24 carriers to cease flying or file for bankruptcy this year, according to the International Air Transport Association. Jet-fuel prices in northwest Europe have risen 40 percent this year. Lufthansa has faced strikes this month by pilots and ground workers in Germany, complicating efforts to reduce spending.

“Our company has the great opportunity to emerge relatively stronger from the increasingly difficult market and competition situation that we find ourselves in,” Chief Executive Officer Wolfgang Mayrhuber said in a statement today. “We have laid the foundations and will not jeopardize our future.”

Lufthansa’s planned cost cuts were raised from a June target of 100 million euros to 150 million euros, Gemkow said today on a conference call with reporters. Lufthansa is expanding a hiring freeze for administrative staff to include other employees such as ground personnel, he added.

Bloomberg