Lufthansa to cut 400 jobs, reconsider new plane orders

Airline Deutsche Lufthansa AG expects to cut 400 administrative jobs at its passenger division and will reconsider its schedule of new aircraft deliveries in a bid save 1 billion euros by 2011.

In a letter sent to workers, Christoph Franz, the deputy chief executive, told employees that Lufthansa’s losses had continued from the first quarter into the second quarter, and that the trend would continue into the second half of the year unless market conditions change.

The airline has reported a first quarter loss of euro 256 million ($360 million) compared with a net profit of euro 44 million in the January-March period of 2008. Sales during the first three months of 2009 fell more than 10% to just over euro 5 billion.

“Demand has slumped perceptibly in all traffic regions, our passenger numbers are declining,” the letter dated July 14 said.

“An even bigger problem is the alarming drop in yields. As a result: We are not earning enough to cover costs in the present year.”

It also added that losses would “increase significantly in the coming year owing especially to the rise in fuel prices.”

As a result, the company had “no other alternative but to resort to painful measures” and its board had endorsed a plan called “Climb 2011″ which envisions saving  euro 1 billion by the end of 2011.

The letter said that meant cutting administrative staff in the passenger division by one-fifth. The changes would be announced “in the coming weeks.”

The company also said it would reconsider the proposed schedule for aircraft deliveries because of the reduced cash flow, but defended the 160 new aircraft it will have to finance between 2008 and 2014.

Those aircraft have a combined list price of  euro 160 billion, but Lufthansa said the expenditure is essential if it wants to maintain a modern, fuel-efficient fleet.

“We can only secure our position against the competition with an excellent product,” the letter said.

Shares of Lufthansa were more than 2% higher at euro 9.27 in Frankfurt afternoon trading.