Austrian Airlines undergoing massive cost-reduction over the next two years

Today’s press meeting at 09:30 confirmed the speculations that have been in the news this past week: Austrian Airlines is on the brink of a massive, €90 million cost reduction

One in ten jobs in the 7000-strong company is affected, meaning a reduction of around 700 to 800 employees up until the end of 2021. The airline expects the majority of staff reductions to happen
with natural fluctuation. However, the previous major restructuring happened 2011/2012, at which time the company had just under 6000 employees, so it would seem logical that the 1,200 jobs that
were created since then could well be at risk.

AUA is facing difficult times -  image courtesy of APA press statement
AUA is facing difficult times – image courtesy of APA press statement


Tough competition through price wars are the reason for this move
Austrian Airlines faces losses not only this year, but also in 2020, as the increase of low-cost carriers at Vienna International Airport has resulted in fierce price wars. At the press
conference, Austrian Airlines CEO Alexis von Hoensbroech explained: “We have to reposition ourselves in order to survive in brutal competition against low-cost airlines. The measures are
partly painful because they deprive us of substance that we have painstakingly built up over the past few years.

The airline had returned to profitability in 2013 following Lufthansa’s initial restructuring, and its adjusted operating profit amounted to 83 million euros in 2018. However, during the first
nine months of this year, this fell by 85% from €110 million to €17 million and the by third quarter, the resulting €70 million is a 33% loss compared to the same period last year.

AUA CFO Wolfgang Jani added “The flood of low-cost airlines and the rise in kerosene costs are putting pressure on ticket prices and thus on our results.

What does this mean for air cargo?
Lufthansa Cargo took over Austrian Airlines’ cargo operations back in 2010 and operate the Vienna hub, using cargo capacities on board Lufthansa and Austrian flights, as well as Road Feeder
services. In separate news, Lufthansa Cargo has also reported global losses this year, affected the same as a number of other cargo operators by the ongoing weak cargo market.

It is, as yet, unclear how the restructuring will affect the cargo network out of Austria. Austrian Airlines is planning to use larger aircraft and less frequencies on certain routes, however
neither Austrian nor Lufthansa Cargo press departments are yet in a position to comment on the cargo situation out of Austria.

Cargo competition has always been tough out of Vienna, since not only does the company compete against direct flights of Middle East and Asian cargo operators, but also has growing hubs nearby:
notably Budapest, which is due to open a state-of-the-art Cargo City in just two weeks from now, and is already a strong magnet for competitor airlines.

Is it still economically viable to keep a Lufthansa Cargo hub running in Vienna, or is the future one of simply being a feeder to the group’s German hubs, as business moves to competing Eastern
European hubs and other direct flight cargo carriers?

Brigitte Gledhill

Source: Cargoforwarder

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