Two major airline groups have announced cost cutting measures after difficult starts to the year, with Lufthansa assessing the need for additional staff and Air France-KLM freezing hiring of support staff.
While both companies saw a rise in the number of passengers using their services, they also each experienced costly disruptions to their operations, dealing with strikes during contract disputes and the impact of conflict in the Middle East.
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Despite this, the companies’ respective leadership were keen to promote positive outlooks for their futures with strong demand expected through the European summer season, especially as Air France’s home country hosts the Olympics and Paralympics.
Benjamin Smith, CEO of the French-Dutch group, said the sporting event would provide the airline with a chance to “showcase its expertise” after a “challenging start to the year” that saw a net loss of €489m despite revenue’s increasing by 5.1%.
He said: “Air France-KLM recorded further revenue growth this quarter, capitalizing on a structurally robust travel demand. However, as anticipated, our operating income was impacted by disruption costs and a slower Cargo business.
“We nonetheless remain confident in our ability to achieve our 2024 unit cost outlook, and are focused on executing our strategic roadmap to deliver our mid-term commitments.”
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By GlobalDataMeanwhile, Lufthansa CEO Cartsen Spohr highlighted a “turning point” for his company ahead of “another very strong summer” and said the long-term wage agreements reached with most of the group’s employees would provide stability for the future.
Like Air France-KLM, the German airline group saw an around 5% year-on-year increase in revenue for the first quarter of 2024 but a net loss of €734m, largely attributed to industrial action by the Verdi union that Lufthansa estimates had a €300m impact on its earnings.
The similarities seen in the fates of both companies during Q1 also crossed into the strengths of their cargo businesses as Air France-KLM blamed a 16.5% reduction in total cargo revenues for part of their losses while Lufthansa saw an adjusted EBIT loss of €22m as its logistics business calms after pandemic highs.
However, looking ahead, the German group said that action such as the halting of new projects and an assessment of the need for additional staff in administrative areas for its core Lufthansa brand were planned to lead to a strengthening of its overall results for the year.
Similarly, for Air France-KLM, the company said that it would be initiating a hiring freeze of SG&A support staff, accelerating transformation initiatives, and stabilising operations as part of an action plan to keep a unit cost of between 1% and 2% for 2024, compared to 2023.
The downward trends seen by the European groups go against the overall increase in cargo demand seen in IATA’s data for early 2024, with overall air cargo demand up 11.9% for the industry and revenue passenger kilometres up 21.5% on the previous year.
