Austrian cost-cutting measures to include fleet upgrade, route closures

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Published: January 11, 2012

Austrian Airlines 737-600. By Rob Finlayson

Loss-making Austrian Airlines (OS) has announced a €220million ($ 280 million) restructuring program, which includes cutting routes, reducing staff costs and replacing its fleet of 11 Boeing 737s with up to seven Airbus A320s.

New OS CEO Jaan Albrecht told ATW in Vienna that an aggressive change in the carrier’s cost structure is urgent. The airline is targeting a savings of up to €220 million this year “and this should reach up to €260 million in year number three,” Albrecht said.

“Aviation is changing. That means Austrian has to change as well,” he said. The former Star Alliance head became CEO in November (ATW Daily News, Sept. 27, 2011).

Last month, Lufthansa CEO Christoph Franz told OS employees that LH would no longer subsidize the financially troubled carrier and it may have to extend its cost-cutting program as the economic outlook weakens demand (ATW Daily News, Dec. 8, 2011).

OS has reduced its 2012 growth rate by 11%. Important OS markets—such as Eastern Europe and Middle East—nearly collapsed in 2011, he said, which led to the decision to make several route cuts, which will be announced by February.

Albrecht said that 27% of the carrier’s earnings go to taxes and fees, and costs could hit €338 million in 2012 because of the European Union’s Emission Trading Scheme (ETS), which took effect Jan. 1. He wants to start intensive talks with suppliers, such as Vienna Airport, to reduce this burden.

Albrecht said that talks with employees for new collective contracts will begin immediately. He ruled out laying off employees, but warned that the airline needs to reduce its cost structure, which is 20% higher than other European carriers.

If its restructuring program is successful, OS plans to add two 777-200ERs in 2013 and two 777s in 2014. The carrier would not comment on which long-haul destinations would be added, but they would most likely be Shanghai Pudong or Newark, N.J.

The carrier’s long-haul fleet comprises four 777-200ERs. Six 767-300ERs will remain in operation at least until 2018.

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