Lufthansa details quarterly losses and planned cost cuts

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Lufthansa's group of airlines generated a combined operational loss of €445 million ($585 million) during the first quarter of 2012, although this could be partly alleviated by earnings from its maintenance and cargo subsidiaries.

The Star Alliance carrier revealed that it will shed around 3,500 administrative jobs worldwide and achieve a third of its planned €1.5 billion efficiency gains by 2014 through lower staff costs.

The German flag carrier's operational loss more than doubled from €169 million during the first three months of 2011 to €381 million in the same period this year.

While it managed to grow revenues 5.6% to $6.6 billion through higher fares and increased ticket sales, the airline says this was offset by air passenger taxes in Germany and Austria, Europe's Emissions Trading Scheme (ETS), and the rising cost of fuel.

Its fuel bill increased by 23% to €1.6 billion and was the main cause for the poorer financial performance, the company adds.

Lufthansa made a net loss of €397 million, marking an improvement on last year's quarterly deficit of €507 million. The modest progress is largely down to negative changes in the time value of its 2011 hedging options, the airline says.

Operational cash flow increased by about 10% to €833 million.

While the Lufthansa passenger airline and Germanwings registered a combined operational loss of €384 million, the group's Alpine subsidiaries, Swiss International Airlines and Austrian Airlines, lost €6 million and €67 million respectively.

Catering arm LSG SkyChefs lost €5 million, but the maintenance, IT and cargo divisions generated operational profits. Lufthansa Technik delivered €67 million; Lufthansa Systems created €3 million; and Lufthansa Cargo posted €19 million profit, albeit down by €45 million against Q1 2011.

As part of its Score efficiency programme - which aims to improve financial performance by at least €1.5 billion through cut-backs and higher sales - the group plans to slash administrative costs by one quarter by 2014. Around 3,500 administrative jobs will be axed, Lufthansa says.

Chief executive Christoph Franz says that the group will only be able to save jobs and create new roles if it restructures administrative functions and accepts redundancies now.

Around €200 million will be saved this year by centralising the group's purchasing functions, he adds. "Double-digit million euro savings" are expected from the optimisation of local traffic within the airline group.

Franz notes that the group grew substantially under his predecessor Wolfgang Mayrhuber - with the acquisition of airlines such as Swiss, Austrian and BMI - so it is a "logical and foreseeable consequence to reduce the complexity" of the group.

BMI was sold to International Airlines Group (IAG) last month, though the £172.5 million ($279 million) pricetag previously agreed will be reduced due to the inclusion of loss-making subsidiaries BMIbaby and BMI Regional.