A couple of days ago, we learned how Lufthansa Group planned to announce some job cuts in the coming days. We now have more details as to what that will look like.
In this post:
Lufthansa will cut 20% of administrative jobs by 2030
Lufthansa Group has just announced plans to majorly cut its administrative workforce. The announcement came during the first company-wide capital markets day in six years, since before the pandemic. The airline plans to cut 4,000 jobs by 2030, representing roughly 20% of the administrative workforce.
This announcement is intended to reassure investors about the company’s commitment to efficiency, which has become a big problem for the company. The job cuts follow a recent announcement whereby Lufthansa Group plans to increasingly centralize management for all airline groups in Frankfurt, so the efficiency gains will largely come from that. Lufthansa Group consists of several airlines, including Lufthansa, SWISS, Austrian, Brussels, Eurowings, Discover, and more.
Lufthansa Group has received criticism for its inability to cut costs and also inability grow its core business (Lufthansa), as the company’s flagship airline has been struggling. It’s notable that Lufthansa Group has fewer planes and operates fewer flights than in 2019, but employs 7% more people.
The situation has gotten so bad that Lufthansa CEO Jens Ritter recently claimed that Lufthansa is so unprofitable that it can’t afford all the new planes it has on order. Speaking of added efficiency, Lufthansa Group CEO Carsten Spohr recently spoke at a company town hall, claiming that improving margins “will require us also to become leaner in admin because we cannot afford to maintain our work at the cost that we have now because we don’t have the margins to invest.”
Here’s how Lufthansa describes the job cuts:
Integrated cooperation within the Lufthansa Group will lead to significant changes in the processes and structures governing cooperation between Group companies in the future. On this basis, the Lufthansa Group is reviewing which activities will no longer be necessary in the future, for example due to duplication of work. In particular, the profound changes brought about by digitalization and the increased use of artificial intelligence will lead to greater efficiency in many areas and processes. Due to these developments and structural adjustments, the Lufthansa Group plans to cut a total of around 4,000 jobs worldwide by 2030, the majority of which will be in Germany. This will be done in consultation with the social partners. The focus will be on administrative rather than operational roles.
My take on Lufthansa’s efficiency focus
First of all, I hate to see job cuts, purely in terms of people losing their livelihood, and no longer having a job in an industry that’s full of passionate people. On the plus side, at least these job cuts will happen over five years, and I imagine there may be some early retirement packages offered, so hopefully there aren’t too many involuntary layoffs.
Lufthansa Group certainly doesn’t strike me as an efficient operation. Maybe the company would even benefit from having fewer people beyond just the cost savings, so that they can stick to the basics, rather than over engineering everything.
Lufthansa would be in a much better place if someone a decade ago had simply said “yeah, we don’t have the resources to create a custom business class product, let’s just take one of the existing off the shelf seats.”
The part that continues to blow my mind in all of this is that Spohr still has a job. Nothing against the guy, I’m sure he’s perfectly, umm, human, but has he really been running the company in recent years in a way where you think “yeah, this is definitely the best person for the job?”
There’s a massive talent pool that would love to lead one of the world’s largest airline groups, and it just seems like Spohr isn’t doing much to energize the company, or move it in any direction other than average. Passengers aren’t happy. Employees aren’t happy. And it doesn’t seem like shareholders are terribly happy either.
Obviously this all gets at the dynamics between management and the board, but is the average Lufthansa Group shareholder really happy with Spohr’s performance? That just strikes me as a major area where there could be some more “efficiency.”
Keep in mind that Lufthansa Group management has been most involved in running the Lufthansa subsidiary, yet it’s also one of the most unprofitable airlines in the group.
By the way, I’m realizing that most of the above regarding management performance would equally apply to American Airlines, but that’s neither here nor there…
Bottom line
Lufthansa Group has announced 4,000 job cuts between now and 2030, representing around 20% of administrative jobs. This follows a recent announcement that Lufthansa Group plans to centralize more functions in Frankfurt, so this is all part of the same initiative.
Lufthansa Group probably does need more efficiency, given that its workforce has grown while its number of flights has decreased. The company certainly doesn’t have much to show for this excess labor. Then again, it seems like the biggest thing that could improve Lufthansa Group’s bottom line would be a new vision, and that will likely require some changes at the top.
What do you make of Lufthansa Group’s desired efficiency gains?
Hopefully the designer of Allegris gets cut with 0 severance
How about laying off those 60 year old overweight stewardesses and all the men! Make flying pleasurable again.
How about laying off those 60 year old overweight managers.
AI can make spreadsheets and powerpoints instead.
LH has to learn the basics of customer service. I'm a FQ of LH and other airlines and I can tell the difference which is striking. LH basically has no respect for those who ultimately pay their fat salaries. Boarding a LH plane is not a favor you do to LH. Before Covid LH was already non competitive. After, if possible, the situation hot worse. You get Ryanair service at the high price of a...
LH has to learn the basics of customer service. I'm a FQ of LH and other airlines and I can tell the difference which is striking. LH basically has no respect for those who ultimately pay their fat salaries. Boarding a LH plane is not a favor you do to LH. Before Covid LH was already non competitive. After, if possible, the situation hot worse. You get Ryanair service at the high price of a legacy airline. They survive only because LH is overly protected here in Germany. We do not expect a customer service such as Emirates or Qatar but just a decent service. They used to serve snack and drinks on European routes. Comes Covid and they scrapped everything. The water they served me during my last flight was even warm....
Just get rid of LH and hand it over to Eurowings and Discover and be done.
The problem with Lufthansa is the original and core Deutsche Lufthansa passenger airline. It has nearly always under-performed the rest of the group, including Swiss, Eurowings, Austrian and Brussels Airlines, not to mention Cargo and Technik. These other airlines have always restructured to be profitable while Lufthansa has done nothing except launching subsidiary airlines like Cityline, designed to avoid the onerous labour contracts of the mother airline. This is no longer sustainable.
The problem with Lufthansa is the original and core Deutsche Lufthansa passenger airline. It has nearly always under-performed the rest of the group, including Swiss, Eurowings, Austrian and Brussels Airlines, not to mention Cargo and Technik. These other airlines have always restructured to be profitable while Lufthansa has done nothing except launching subsidiary airlines like Cityline, designed to avoid the onerous labour contracts of the mother airline. This is no longer sustainable.
But they won’t lay off Carsten Spohr’s bodyguards.
I've always maintained that Irishmen and Germans are the absolute worst people to run full service carriers. But if we're talking about LCCs then absolutely they are the best candidates (and I'm not making any jokes here).
LH's management team is completely incompetent and it's frankly baffling that they have been allowed to double and triple down on the same irrational actions and strategies. LH mainline has an effective monopoly on business travel from one of the world's largest and most globalized economy, plus a material share of leisure traffic from one of the world's wealthiest populations. Yet they can't seem to figure out how to make money running LH mainline -...
LH's management team is completely incompetent and it's frankly baffling that they have been allowed to double and triple down on the same irrational actions and strategies. LH mainline has an effective monopoly on business travel from one of the world's largest and most globalized economy, plus a material share of leisure traffic from one of the world's wealthiest populations. Yet they can't seem to figure out how to make money running LH mainline - on paper it should be the most profitable airline in the group.
This is a management team that was pushing A330s (the most efficient long-hauler) to a new subsidiary while mainline had a widebody shortage and an inefficient fleet. And then using the subsidiary, whose only differentiation to customers is worse service and vague leisure branding, to fly to non-leisure markets like YYZ, YVR, MSP, ATL in place of LH mainline. The lack of focus on core activities is appalling, it's like if Apple couldn't make any money on the iPhone, and spent no time or effort on trying to turn it around.
At this point, they may as well scrap LH mainline and transfer all the frames to Discover, Eurowings, and City Airlines, as the foundation of their argument seems to be that it's impossible to make money flying LH mainline.
Another blatant example of how some type of people are provided with multitude of opportunities to continue to fail upwards.
Lufthansa hasn't been able to grow because its seats are still 2-2-2 up front.
No business traveler wants to climb over other people for those prices.
Fix the seats, fix the problem. United has better hard product than all of LH group.
I wish the LH group would be managed by the same folks as Elisabeth Line in London...
Honestly, they would do better to layoff FRA corporate staff and promote ZRH staff to run the whole company.
Swiss is based in Basel.
Thank you!
I am glad that I sold my Lufthansa shares for a slight profit at $11 a couple of years ago. It wasn’t a great investment and it doesn’t look like it will be going forward.
Ben, I just hope this post doesn't get you the Cairo treatment from LH :)
Oh no! Anyway! As far as i am concerned, shut down the LH in Lufthansa and have the swiss take over all operations.
what’s happened for Frau Spohr? Vivian killed that poor italian girl in her BMW. you can hardly believe that she still remains Patron of the Help Allianz… the lufthansa NGO!
Nepotism at its finiest, not a good image on LH, that's for sure!
I wonder if the people who will be cut will also include those who came up with and approved the allergis concept.
AI in the works
How do you know this? Be specific.
Nice photo of the a340. The airline business is cyclical. Let this serve as a reminder to the profit sharing cry baby air stewardesses here in the U.S. that they are disposable.
real "I got mad that a flight attendant didn't want to sleep with me" energy in this post
“… cry baby air stewardesses here in the U.S. that they are disposable.”
And you wonder why all women hate you.
Suppose they will undo a bunch of the airlines within an airline that are run arounds against LH labor unions?
The sad reality is that some of the best performing employees at non-German subsidiary airlines will lose their job to protect German jobs at LH headquarters.
Its an old model being propped up by (declining) OPM flying.
When there is virtually no difference between LH and the LCCs, what's there to attract a regular non-OPM flyer who can get the same for much less elsewhere
Yet they still trying to buy other airlines for billions and start more smaller groups of airlines! The whole board need to be replaced!
Why?
Replace Lufthansa with American Airlines and this is still accurate.
Well likely as is usual in Germany no one will actually get terminated, rather Lufthansa will offer compensation packages and people can voluntarily leave
You mean they’ll treat their staff like people instead of cattle? The horror!