Lufthansa (LH, Frankfurt International) CEO Carsten Spohr will unveil a new restructuring plan for the carrier after it issued a profit warning for its 2014 and 2015 Financial Years. The German carrier shocked the trading world with an announcement stating its anticipated operating profit for 2014 would fall EUR300million (USD405.9million) short of its projected earnings of EUR1.3billion (USD1.76billion) while 2015 would fare worse with EUR2billion (USD2.70billion) expected against a previously anticipated EUR2.65billion (USD3.58billion).
"Given these economic developments the Executive Board no longer believes that the earnings target for 2015 of EUR 2.65 billion set as part of the Score programme can be achieved. The company nonetheless intends to substantially increase its operating profit compared with the current year. The basis for this will be laid with the noticeable reduction of capacities during the winter timetable period," the airline said.
At a press conference on Wednesday, June 11, Chief Financial Officer, Simone Menne, told Reuters newswire that the proposed plan will involve new spending cuts which could include the possible cancellation or deferral of plane orders from Airbus (AIB, Toulouse Blagnac) or Boeing (BOE, Washington National).
Research of Airbus and Boeing order sheets reveal Lufthansa currently has outstanding orders for A320s, A321s, A350s, A380-800s and B747-8s.
Among the factors blamed for the sudden downturn are a weaker than expected revenue development in the carrier's passenger and freight businesses as well as the impact of the “Vereinigung Cockpit” pilots’ union strike in early April which cost the carrier EUR60million. Additionally, the ongoing Venezuelan Air Ticket Remittance crisis has also cost the carrier an estimated EUR60million.
Menne also said that the Gulf carriers' strong capacity growth was a major concern.
