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New Austrian leadership to axe routes and cut staff costs

Austrian Airlines is to axe several routes and introduce measures cut personnel costs, in a sweeping programme to underpin the flag-carrier's weak financial position.

It has detailed the programme just hours after confirming the sudden departure of chief executive Alfred Otsch, who will formally resign from the airline tomorrow.

Austrian will cut capacity by 10% this year compared with 2008, axing routes including Mumbai, Burgas and Baia Mare by the end of March. There will be no reinstatement of the Syrian link to Aleppo this year, contrary to earlier plans.

The airline expects to save €115 million ($147 million) from the network cuts, which also include reduction of frequencies in weak period.

Another €110 million will be trimmed from personnel and supplier costs. Austrian intends to introduce flexible working time, reduce leave, freeze pay and suspend pension contributions.

It says the measures are designed to "secure liquidity" and brace for an "anticipated collapse" in revenue of up to 15% this year, amounting to some €225 million.

Lufthansa, which is in the process of taking over Austrian, has already warned that the carrier must turn a profit.

"We retain sole responsibility for our own actions in every regard as an airline in the Lufthansa Group," says Austrian chief operating officer Peter Malanik, who has jointly taken charge of the carrier following Otsch's resignation. "We must overcome the current crisis single-handedly as a result."

His co-chief, Andreas Bierwirth, adds: "In the medium term we must take our profitability and cost structure to a robustly-competitive level."

Bierwirth says this amounts to improving Austrian's results by €200 million by 2012, in order to achieve earnings margins comparable with other European operators.

Austrian warns that, as the integration with Lufthansa takes shape, the carrier will need to look at further measures - in the areas of supply, network and sales, and cross-divisional personnel - to achieve potential savings.

"While the main burden of responsibility for solving the situation will be on the company itself, our partners at the Vienna business location will also have to make a significant contribution," it states.

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