Airline tightens belt

Lufthansa Deputy Chief Executive Christoph Franz told the Sueddeutsche Zeitung newspaper on Tuesday that the airline would adopt elements of the "low-cost" business model, particularly on its European routes.

“We must create additional markets through favorable prices,” the newspaper quoted him as saying.

Among the belt-tightening measures under consideration are raising aircraft capacity and a change in the catering policy, reducing the space reserved for kitchens. However, Franz stressed that food and drinks would still be free on flights. Making customers pay for refreshments "does not work with a premium brand," he added.

Lufthansa hopes the proposed measures will drive down prices sufficiently to enable it to compete with low-cost carriers such as Easyjet and Ryanair.

The German flag carrier reported last month that its nine-month operating profit had plunged by more than 75 percent.

Lufthansa has already introduced several sweeping measures to cut costs. The company has said it will stay in the black this year, but adds that this outlook "remains subject to very considerable risks."

Deputy CEO Franz predicted that 2010 would be a "difficult" year for the airline.

"We are able to sell enough tickets but we are not in a position to raise prices. And frankly, I do not see any trend towards a sustainable improvement," he said.

Lufthansa shares fell 2 percent – the second biggest decline among German blue chips – after Franz made the comments in an interview with the Financial Times Deutschland.

Pick-up in passenger numbers

Last week, the airline said passenger traffic picked up in October by 1.1 percent from the same month a year earlier.

The increase to 5.12 million passengers came following a 12-month fall of 2.0 percent in September, suggesting that the general brighter prospects for the global economy were beginning to be reflected in the transportation sector.

For the entire Lufthansa group, which now includes Austrian Airlines, British Midland (BMI) and Swiss, passenger numbers climbed by 26.9 percent to 7.95 million.

Although freight operations continued to face a difficult market environment, Lufthansa Cargo reported a slight sales increase of 0.3 percent on a 12-month basis even though the volume of goods carried declined by 4.0 percent to 144,000 tons.

rb/AFP/Reuters

Editor: Kyle James