Lufthansa Prepares Job Cuts to Regain Efficiency
Lufthansa, Europe’s largest airline group by revenue, is preparing to announce the cutting of several thousand jobs. The decision, which will be made official at the company’s first Capital Markets Day in six years, is a response to the need to restore profit margins and strengthen investor confidence.
A Deep Cut in Administration
Although the exact number of layoffs is not yet known, two sources with direct knowledge of the discussions confirmed that the company intends to cut 20% of its administrative staff. The reductions would affect the entire group, not just the main airline.
CEO Carsten Spohr himself acknowledged to employees in an internal meeting that current costs make it unsustainable to maintain operations without compromising investment capacity:
“All this will require us to become leaner in administration, because we cannot maintain the current cost base. And in our industry, without modern technology, there is no way to compete.”
Labor Hurdles and Union Pressure
The restructuring faces internal resistance. The conflict over pensions remains unresolved and could cast a shadow over the event in Munich, while a pilots’ strike remains a latent threat on the table.
According to a third informant, any cuts would encompass all divisions of the holding company. Despite this, analysts believe the market will continue to pressure the company to demonstrate its ability to transform into a more efficient organization.
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A Bernstein analysis pointed out that, despite operating with fewer aircraft and lower activity than in 2019, the group now employs 7% more staff.
Role of New Subsidiaries
Lufthansa’s future depends largely on its ability to leverage two of its new German operations: Discover and City Airlines.
While labor agreements at the parent company are rigid and costly, the subsidiaries have more flexible contracts. This, according to sources close to the company, will allow for the shifting of resources to lower-cost, more competitive units.
Management assures that this flexibility is key to steering the transformation process. However, convincing analysts and shareholders will not be easy.
Short-Term Focus
Ruairi Cullinane, an analyst at RBC, warned that Lufthansa must prioritize immediate challenges over medium-term goals.
Investors, for their part, await confirmation that the group remains on course towards its objective of significantly increasing adjusted EBIT by 2025.
With information from Reuters.
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