Lufthansa will eliminate 4,000 administrative roles by 2030 and set higher profitability goals, aiming to enhance efficiency through digitalization and automation, the German airline group announced on Monday.
The company’s shares rose following the news, climbing 2% in early trading. By 1156 GMT, they increased by 1.3% to 7.85 euros.
Lufthansa has faced challenges in reducing costs and driving growth due to labor issues in recent years. Last year, it issued two profit warnings and abandoned its target of achieving an 8% operating margin that year.
“We certainly lag behind some competitors in financial performance,” stated Chief Executive Carsten Spohr during the capital markets day.
LUFTHANSA AIMS TO ASSURE INVESTORS
The group clarified that the 8% target remains, albeit postponed to later in the decade as part of new mid-term goals for 2028 and 2030.
Lufthansa is implementing an ambitious group-wide turnaround plan announced last year. The capital markets day, the first in six years, was intended to assure investors that the plan is on track.
Particularly, Lufthansa aims to revitalize its “problem child” core airline while tackling rising costs that concern analysts and investors.
Lufthansa now anticipates an adjusted operating margin of 8-10% from 2028, up from the previous 8% target, alongside an adjusted free cash flow exceeding 2.5 billion euros ($2.9 billion) annually, as disclosed on Monday.
Reuters recently reported that Lufthansa plans to reduce approximately 20% of its non-operational workforce.
The cuts will primarily occur in Germany, in consultation with social partners, where the airline group has faced significant cost management challenges.
Chief Financial Officer Till Streichert later mentioned the airline aims to hire 1,500 administrative staff in other international locations to offset costs.
PILOTS’ UNION DECIDING ON STRIKE
Verdi, a union representing Lufthansa employees, including ground staff, criticized the job reductions, citing pressure from stringent European environmental taxes and politicians’ decisions to maintain higher taxes.
The pilots’ union is concluding a vote on Tuesday regarding potential strike action over pension changes.
Executives have threatened to relocate more jobs to newer, cost-effective subsidiaries like City Airlines and Discover.
Lufthansa has consistently stated that cost management is more straightforward at other bases, such as Rome, home to its minority-owned Italian carrier ITA Airways.
The group intends to acquire over 230 new aircraft by 2030 and enhance cooperation among its airlines to boost profitability.
This integration allows for greater investment in newer, more profitable subsidiaries and reallocating resources from cost-heavy areas as needed, executives informed Reuters.
