Bremen-based regional airline OLT Express Germany will start its restructuring programme by shrinking its fleet and likely also reducing its workforce.
The carrier is decommissioning up to five Fokker 100s after it lost two contracts, including a wet-lease agreement with Swiss International Air Lines, which expires at the end of March.
The airline is also closing down a number of newly established routes.
Joachim Klein, managing director, says that due to increased operating costs the airline has decided to make changes at an early stage, thereby securing its continued existence.
The number of job losses is not yet clear, however. This is currently being negotiated with employee representatives, and the airline says that reduced working hours and part-time employment could be used to slash costs.
But it adds that aside from cutting operational staff, it will "probably be unavoidable" to also reduce the company's administrative and technical workforce.
OLT says that it is further evaluating whether to keep all three bases in Bremen, Stuttgart and Saarbrücken.
The airline will stop all flights in Berlin, Stuttgart and Vienna, though it aims to resume routes from Karlsruhe/Baden-Baden and Saarbrücken to Vienna in the summer 2013 schedule.
OLT took over Stuttgart-based Contact Air in September, after the latter lost its regional partnership contract with Lufthansa.
Klein says it no longer seems feasible to operate the combined fleet and 500-strong workforce with a new, expanded route network, as previously planned.
OLT had two Fokker 100s, four Saab 2000s and one Saab 340 before the merger, while Contact Air had eight Fokker 100s.