Lufthansa announced a sharp turnaround in strategy on Monday, dropping low-cost long-haul flights by German budget subsidiary Eurowings and ditching plans to integrate Brussels Airlines with Eurowings.
The about-turn came after the Lufthansa Group issued a profit warning last week, its second in two months.
Eurowings will halt long-haul flights from Germany and the services revert to group network carriers Lufthansa, SWISS and Austrian Airlines, while Brussels Airlines will realign “with the network airlines” rather than dissolve into Eurowings.
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Only last month, Lufthansa announced “the next decisive steps in the integration” of Brussels Airlines and Eurowings, with Brussels’ aircraft to be rebranded.
Along with the reversal, Lufthansa promised to pay 20% to 40% of its annual profits as dividends to investors “regularly”.
Lufthansa is still forecast to make a profit of up to €2.4 billion this year after reporting a €2.8 billion profit last year and €3 billion in 2017.
But Eurowings has yet to turn a profit and Lufthansa warned last week that its revenues would “decline significantly” amid serious overcapacity in Europe.
The budget operation lost €231 million in 2018 is expected to lose double that amount this year.
On Monday, Lufthansa promised “a 15% reduction in costs at Eurowings by 2022”. It said it would provide details on a turnaround plan for Brussels in the third quarter of this year.
Eurowings has grown consistently in Germany since 2015 when Lufthansa announced its redevelopment as a budget carrier and expansion into long haul.
The subsidiary had previously operated as Lufthansa group’s regional carrier.
Brussels Airlines, formerly SN Brussels, was wholly acquired by Lufthansa in January 2017 with the intention of Eurowings absorbing it.
But the integration was delayed by Eurowings’ takeover of Air Berlin’s operation at Dusseldorf following the latter’s collapse in late 2017 and its partial acquisition by Lufthansa.
Lufthansa said yesterday that Eurowings’ long haul operations had added “distraction and complexity” and the takeover of Air Berlin had saddled it with “high integration costs”.