On the cover of its first-quarter report, the Lufthansa Group lists five key points concerning the company’s performance. Four of them are positive. And then there is this: ”All operating segments except for Lufthansa Cargo are developing in line with forecasts.”
Perhaps, with a clue as blatant as that, and the dismal first-quarter financial and operational performance numbers shown in the chart at right, today’s announcement of job cuts and a new strategy aimed at bringing Lufthansa Cargo back to profitability should not come as a surprise.
In an announcement to its staff, Lufthansa Cargo said between 700 and 800 jobs, 500 of them in Germany, would be cut. This is between 15% and 17% of the workforce – a huge cut. In addition to the job cuts, and as part of the C40 cost-reduction plan announced earlier this year, Lufthansa Cargo said it would
- introduce new products and services in order to reach new customer groups
- expand the metal-neutral partnerships it has entered with carriers such as All Nippon Airways, United Airlines, and Cathay Pacific
- continue the “digitalisation of all our main business processes in our eCargo program.”
The goal is to reduce costs by €80 million annually, with €55 million coming from the staff reduction. Lufthansa, like Air France-KLM, IAG, and some of the big Asian carriers, has lost market share in recent years to carriers based in the Gulf Region, Turkey, Russia, and Luxembourg. Obviously, cutting costs is important for survival in this highly competitive environment, but whether cutting costs, by €80 million or any other amount, will be enough is another matter. Following through on the three aspects of the C40 program will also be crucial.