Airline Code [AUA]
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Tags :Continental Europe, Austrian Airlines, Strategy, outlook, financial crisis
Dr. Peter Malanik, COO and Board Member, made the statement on the current situation: “The global economic crisis has now reached all markets, demand is collapsing and the outlook offers very little reason to be optimistic. The International Air Transport Association (IATA) is now forecasting double-digit falls in bookings.”
“We expect to see a reduction in revenue of up to 15% at the Austrian Airlines Group in 2009, which, even when offset by falling kerosene prices, is still the equivalent of approximately EUR 225 million. We must compensate for this sum by adjusting production by a further 5% and implementing measures in a range of different areas. Even after closing, we retain sole responsibility for our own actions in every regard as an airline in the Lufthansa Group, and must overcome the current crisis single-handedly as a result.”
Short-term crisis package
In order to secure liquidity in the current crisis and compensate for the anticipated collapse in revenue, a range of time-limited, effective measures are to be introduced. The total package will be worth approximately EUR 225 million.
Another cut in production of 5% will be made on top of the previous reduction, meaning that capacity is to be reduced by 10% in total in 2009 compared to the previous year. This relates to route cancellations such as Mumbai (from 01-Feb-09), Burgas (from end-March) and Baia Mare (from 16-Feb-09). Contrary to original plans, moreover, Aleppo will not be incorporated into the flight schedule this year. There will also be targeted reductions in frequency during seasonally weak periods and on individual flight days on a wide range of different routes. These capacity reductions are designed to produce an aliquot reduction in variable costs worth approximately EUR 115 million.
Other measures will affect staffing-related issues, currently being negotiated with staff representatives. These include flexibilisation of working time, reductions in holiday and leave time, a temporary salary waiver and time-limited suspension of pension fund contributions. Negotiations over cost reductions are also to be held with external suppliers. Strict investment management and optimisations in other areas should produce additional effects. In total, it should be possible to achieve an effect on the result worth around EUR 110 million.
Medium-term improvement in result by 2012
CCO and Board Member Dr. Andreas Bierwirth said the following about the midterm measures improving the result: “In the medium term, we must take our profitability and cost structure to a robustly competitive level after the crisis. This corresponds to a necessary improvement in our result of approximately EUR 200 million, to be achieved in stages by 2012. Only then would we have an EBIT margin of appr. 6-7%, the level usual amongst European carriers and a solid foundation for future growth in the Group. We will, and should, design our integration into the Lufthansa Group after closing on our own initiative and in such a way that we can benefit from the skills and know-how of the Lufthansa Group when required. As the Austrian Airlines Group, with our Austrian hospitality, top product and dedicated employees, we continue to stand for an exceptional and unique customer experience, and remain a premium brand.”
In order for the company to be well-prepared in terms of competitiveness and in its partnership with Lufthansa once the crisis is over, it will also be necessary to work out further measures, some specific to particular divisions and some throughout the company that will enable the company to implement robust cost reductions and realise synergies. In this way, it should be possible to achieve an improvement in result of EUR 200 million by 2012. Potential savings should be made in four key areas: suppliers, network & sales, divisional optimisation and cross-divisional personnel issues. The company has already launched its own project to work out concrete cost-cutting and synergy measures in all divisions.
Concluding, both executive committee members stated: “Overcoming the crisis and securing our future are highly challenging goals. 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.”
(c) Centre for Asia Pacific Aviation. Date posted: 02-Feb-08
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Austrian Airlines implements measures to overcome crisis 
