Luxair: Cost cuts necessary to guarantee survival

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Luxembourg flag-carrier Luxair's parent is warning that the airline's survival depends on cutting its cost base in order to generate an additional €25 million ($32 million) annually from 2015.

Luxair Group is backing the findings of a consultancy which analysed the carrier's business model, and says that it will apply its conclusions during renegotiation of collective bargaining agreements.

It states that the airline's strategic model is vulnerable and that altering its cost structure is "essential to guarantee the survival" of the carrier.

But the necessary measures can be implemented without "mass" redundancies, it adds, as long as talks with workers' representatives result in agreements that will improve the earnings by €25 million per year.

While the consultancy's analysis has "endorsed the viability" of the airline's strategic model, it has highlighted its "extreme fragility", says the company.

Structural losses at the company are preventing investment, it says: "Worse, the extent of these losses is threatening the economic and financial balance of Luxair Group as a whole."

Luxair Group is some 60%-owned by the state and Banque et Caisse d'Epargne de l'Etat, while its other shareholders include Lufthansa with 13%. The group's activities - besides the airline - include tour operations, cargo, and handling.

It brought in consultancy Roland Berger to assess the state of the carrier, adding that it wants to have a "modern and competitive" airline by 2020.

Luxair has five Boeing 737-700s and -800s and six Bombardier Q400 turboprops, as well as six Embraer regional jets. Fuel prices hit the airline hard in 2011, and its full-year losses increased to €16 million. The carrier transported just over 800,000 passengers in that year, with a 58% load factor.