Augsburg Airways is giving up services in its own right, as well as franchising for Lufthansa, to rely totally on wet-lease work with the German flag carrier. The regional, which operates Bombardier Dash 8 Q400/300 turboprops, is becoming a Team Lufthansa carrier because it could not make money on its other operations, says president Manfred Scholz. Augsburg, which carried 970,000 passengers in 2001, made a loss of €5.2 million ($5.1 million) on revenues of €125 million in 2001, and at best will break even this year.

Scholz has been brought into restore Augsburg to profitability with a drastic cost-cutting plan that includes reducing staff numbers by 144 people to 420, improving maintenance processes, renegotiating leases and selling aircraft. Augsburg approached Lufthansa to transfer to an all wet-lease programme with a view to selling out, says Scholz. Lufthansa declined the purchase offer. It bought a stake in Eurowings last year to boost its presence in the regional market and had major anti-trust concerns about buying into another German carrier.

"You can't make money on franchising. Wet-leasing at least gives you a margin if you keep costs under control," says Scholz. "Cost leadership is my view of the future to keep the business."

Source: Airline Business