Lufthansa springs new big cost cuts

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The airline will focus on slashing costs to do with passenger activity, a spokeswoman said.

Frankfurt -- Lufthansa announced extra cost cuts on Thursday, in part by shedding office staff, to save one billion euros (1.4 billion dollars) per year from 2011.

Spokeswoman Claudia Lange gave substance to a report by the daily Handelsblatt saying that the plan, dubbed "Climb 2011," would focus on passenger activities which have slumped amid the global economic downturn.

"Our passenger costs must fall," she told AFP, adding that details would be released in the coming weeks.

A letter by Lufthansa's new chief executive Christoph Franz to staff warned that higher fuel costs and falling passenger numbers posed a real threat and said: "This situation is forcing us to act."

"Air traffic is mired in the worst crisis in its history," Franz said.

The International Air Transport Association (IATA) said in Geneva that its members did not expect any improvement until the end of the year, owing also to the swine flu pandemic.

After posting a first-quarter loss, Lufthansa's first-half results "will show that this negative trend is continuing," Franz said.

"We must now make ever more determined efforts to counteract the trend," he stressed, adding: "We have no other alternative but to resort to painful measures."

IATA said its latest airline survey found that "even the optimistic respondents don't see significant recovery before the fourth quarter of this year and others not until early 2011."

The group said last month that airlines would lose nine billion dollars this year.

In mid June, Lufthansa had already said it would be forced to take extra measures to avoid posting a full-year loss.

Lange told AFP that of roughly 2,000 administrative posts in the airline's passenger division, 20 percent would be cut in the medium term.

Lufthansa, which said traffic fell 2.9 percent in June, is struggling to remain competitive with rivals such as low-cost carriers.

"Many of our competitors are today producing at distinctly more favourable cost levels," Franze said.

British Airways has slashed jobs and asked staff to take pay cuts and even work temporarily for free, and Air France-KLM might reduce its workers' hours if things don’t pick up soon, its chief executive said last week.

Lufthansa would reappraise all operations, including "structures, projects and processes," the new chief executive vowed.

It is currently trying to take over two other carriers, Austrian Airlines and the Britain's BMI.

Lufthansa shares gained 1.76 percent to 9.25 euros in midday trading on the Frankfurt stock exchange, while the DAX index of leading stocks was 0.55 percent higher overall.


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