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.
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?
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