FRANKFURT (Reuters) - German airline Lufthansa will speed up cost cutting to try to boost productivity at its low-cost Eurowings subsidiary as it battles to defend market share in a competitive European market, Chief Executive Carsten Spohr said.
“After quick growth in recent years we will first and foremost reduce complexity and costs (at Eurowings),” Spohr said in an interview with German weekly magazine Der Spiegel.
“That’s why we have switched growth to zero. That is an absolutely rational step in an industry with high overcapacity,” he added.
Poor margins at Eurowings compared with sector rivals were cited by the group as a major reason for a profit warning on Sunday. Eurowings’ revenue was also forecast to fall sharply in the second quarter.
The move saw the airline group’s shares plunge 11% on Monday, dragging down rivals across the sector.
Asked about consequences for jobs, Spohr said Eurowings would retain a strong position within airports such as Frankfurt, Munich, Zurich and Vienna.
This would allow Lufthansa to continue offering Eurowings employees pay and social standards above sector averages, Spohr said.
Lufthansa is due to hold a capital markets day for investors on June 24.
Reporting by Vera Eckert; Editing by Mark Potter