Lufthansa puts brakes on fleet expansion, targets cost saving

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Lufthansa is slamming the brakes on its planned fleet expansion as it aims to improve financial performance by €900 million ($1.18 billion) per year by 2014.

In a letter sent to Lufthansa employees, chief executive Carsten Spohr has detailed how the passenger airline will contribute to the €1.5 billion 'Score' efficiency programme target of the parent group.

Sales are to be increased by €300 million while the carrier wants to cut costs by €600 million in a "sustained" manner.

Spohr says that return on revenue needs to rise again after it fell over the past year to around 1% in 2001. The 'Score' objective is to achieve a group margin of 8%.

Having already slowed its capacity expansion last year, the airline has now decided not to grow its number of aircraft at all until 2014. Available seat kilometres will remain flat this year, and will increase by no more than 4% in 2013 and 2014 as loss-making routes are discontinued.

Saving €600 million per year will be equal to a combined effect of a 5% lower fuel consumption per passenger through the retirement of older aircraft; 5% reduction in staff costs per flight hour; 5% lower tax and fees such as airport and air traffic control charges; and a 5% reduction in group-internal costs such as maintenance, catering and training, says Spohr.

He adds that the company will not make any decisions about a successor for its Airbus A340 fleet - which could be either the A350 or Boeing 787 - until the efficiency programmes deliver "initial success".

Lufthansa will also increase the use of its low-cost subsidiary Germanwings on its European network and reduce the number of different aircraft types.

While the mainline carrier will concentrate on traffic at its main hubs in Frankfurt and Munich - as well as focus cities Berlin, Dusseldorf and Hamburg - Germanwings will take over routes in Cologne, Hanover and Stuttgart. In future, each city will be served by just one of the two airlines so as to "avoid at last the losses in the decentralised traffic", says Spohr.

The number of aircraft families is to be reduced from six to four by the end of the decade. Lufthansa presently has 32 737-300s and 23 737-500s, according to Flightglobal's Ascend Online database, and these models will all now be stationed in Frankfurt. They will subsequently be decommissioned by "around" 2016.

The airline also wants to retire all BAE Systems Avro and Bombarier CRJ700 regional jets from its fleet as soon as possible.

The average age of the fleet should stop rising and aircraft older than 25 years are to be phased out, "if possible", to cut the fuel bill, the letter adds.

Separately, in 2014 the first class cabins will be removed from 13 747-400s and the remaining A340-300 fleet, so that these aircraft can be deployed more lucratively on routes which do not attract first-class customers, a Lufthansa spokesman tells Flightglobal. He adds that this will be around 20% of the airline's intercontinental fleet.