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Brussels Airlines To Reduce Fleet Size By 30% For Future Survival



Brussels Airlines Airbus A320
Brussels Airlines, as part of the Lufthansa Group, in a press release today has decided to take substantive and essential measures to ensure the company’s survival. Impacted heavily by the continuing development of COVID-19, the airline has been met with ongoing extremely low demand and worsened financials, forcing the carrier to structurally reduce its costs to a competitive level in order to grant a future for Brussels Airlines. With the airline’s turnaround plan, Brussels Airlines will be cutting marginally profitable and unprofitable routes in an effort to tack its cost structure. The plan would result in a fleet reduction of 30% and a 25% smaller workforce. The airline is confident in its ability to safeguard 75% of its employment and grow back to profitability when expected air travel demand bounced back to normal by 2023.

Brussels Airlines Airbus A319

The coronavirus crisis is exerting unprecedented pressure on airlines worldwide, and its total revenue impact is expected to exceed 240 billion euros. The number of bookings received fell by more than 60%, and the number of cancellations reached a record high. As a result, many airlines in Europe and elsewhere have had to lay off employees. Unfortunately, Brussels Airlines was not spared from this crisis. Since the temporary suspension of all flights on March 21st, the company lost 1 million euros a day due to loss of revenue and inevitable costs such as aircraft leasing and maintenance.

On February 28, the company first announced the impact on air travel demand. The situation deteriorated week by week and the number of days cancelled exceeded the number of bookings received. Today, demand is still very low. According to analysts and experts, the demand for air travel in 2021 is expected to be 25% lower than before the crisis, and the aviation industry can only expect to return to 2019 levels as early as 2023.

“We started the year 2020 with positive results in terms of number of passengers and revenues; and for this summer, we planned a strong leisure offer as we could compensate part of the business we lost due to the bankruptcy of Thomas Cook Belgium. But the Coronavirus pandemic is hitting Brussels Airlines extremely hard. We had no other choice than to temporarily suspend our flights as of March 21st and introduce technical unemployment for the entire company. This unprecedented crisis has worsened our financial situation obliging us to take substantial and indispensable measures. The restructuring is urgently needed in order to survive the current crisis and to become structurally competitive in the future”

Dieter Vranckx, CEO of Brussels Airlines

Brussels Airlines management plans to focus on achieving structural profitability after pulling the company out of the crisis, this will enable solid growth. The carrier plans to reduce its overall costs while increasing efficiency and productivity. Full positive EBIT margins will enable the airline to ensure its future, invest in the fleet and further develop its hub at Brussels Airport. In addition, Belgian domestic airlines will ensure that they continue to play a pivotal role in the Belgian economy and remain one of the core airlines within the Lufthansa Group.

The main measures of the turnaround plan includes:

  • The review of the network by focusing on the market needs and by optimizing the route profitability.
  • The adaptation of the fleet according to the network optimization: from 54 to 38 aircraft (-30%)
  • The reduction of the personnel costs by reducing the number of jobs by 25%
  • Together with the social partners, the number of forced redundancies will be reduced to a maximum extent.
  • The reduction of overhead, operational costs and the increase of operational efficiency, among others by improving productivity and further standardizing the fleet.
  • The simplification of the employee reward set-up, aiming at remaining an attractive employer while controlling the future cost evolution.

Brussels Airlines is aiming to do everything in its power to limit the number of forced dismissals. The company invites its social partners to jointly evaluate all alternative measures to minimize social impact; measures such as seasonal contracts, pensions, part-time work, unpaid leave, and volunteering to seek future volunteers elsewhere, these are just some listed options.

“The strength of our company are our employees and we do everything we can to protect our staff as much as possible. The way how we deal with the social impact is for us as important as the end goal itself. It’s the management’s responsibility to make sure that our company can survive the crisis. But let’s be clear, the intention is not only to survive but to build a healthy company with a long-term structural profitability and growth perspectives. We strongly believe in the plan and herewith in the future of Brussels Airlines.”

Dieter Vranckx, CEO of Brussels Airlines

Brussels Airlines Belgian Icons Liveries

Although a turnaround plan is indispensable to overcome the crisis, continued dialogues with the Belgian government and Lufthansa are still crucial. The Belgian airline hopes that talks with the Belgian authorities on the financial support needed to resolve the consequences of this unprecedented crisis will yield positive results, while it continues to seek assistance from Lufthansa on the restructuring costs.

1 Comment

1 Comment

  1. BelgianBeerGuy

    May 13, 2020 at 2:36 am

    Lufthansa got too big of a plate now they can’t hold all of their eggs. SMUR

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Airline Operation

Lufthansa Group To Implement Permanent Capacity Reduction Of 150 Aircraft By 2025



Lufthansa A380

The Executive Board of Deutsche Lufthansa AG approved the third package within the Group-wide “ReNew” restructuring program earlier today.Due to significantly lower than expected air traffic recovery, Lufthansa’s Executive Board has today adopted several measures to cut costs and preserve cashflow, including reductions in fleet size and personnel.

The outlook for international air traffic has significantly worsened in recent weeks. With the summer travel season coming to an end, passenger and booking figures are declining again, after slight signs of recovery were still evident in July and August. In view of these developments, Lufthansa has finalised decisions on the third package within their restructuring program earlier today. 

Lufthansa Fleet Parked
Lufthansa Fleet Parked

In detail, the Executive Board adopted the following resolutions:

  • The capacity outlook for the passenger airlines will be significantly revised; the previous assumption that an average production level of 50 percent of the previous year’s value would be reached in the fourth quarter of the year no longer seems realistic. If the current trend continues, the available seat kilometres will probably only be in a range between 20 and 30 percent, compared to the previous year.
  • The medium term fleet planning will be adjusted and currently foresees  a permanent, Group-wide capacity reduction of 150 aircraft by the middle of this decade (starting point is the Group fleet including wet-leased aircraft).
  • In addition to the fleet changes already communicated, the following decisions have been made: After six Airbus A380s were finally taken out of service in the spring, the remaining eight A380s and ten A340-600s, which were previously intended for flight service, will be transferred to long-term storage and removed from planning. These aircraft will only be reactivated in the event of an unexpectedly rapid market recovery. In addition, the remaining seven Airbus A340-600s will be permanently decommissioned.
  • The fleet decisions mentioned above will result in a further impairment of up to EUR 1.1 billion. The amount is expected to be accounted for in the third quarter of the current year.
  • The previously announced personnel surplus amounting to 22,000 full-time positions will increase as a result of the decisions taken in regards to the third package within the restructuring program. The change in permanent staffing levels within flight operations will be further adjusted in regards to market development. The compensation and reduction of personnel surplus will be discussed with the responsible employee representatives.
  • Irrespective of the negotiations on reconciliations of interests and social plans for redundancies within the Lufthansa Group, the Executive Board’s objective remains agreeing on crisis packages with the collective bargaining partners that limit the number of necessary redundancies.
  • Despite the worsened outlook, the revised financial planning intends to further reduce cash outflows through strict cost management. The outflow of liquidity is to be reduced from currently around EUR 500 million per month to an average of EUR 400 million per month in winter 2020/21. The previously communicated Group target of returning to positive operating cash flows during 2021 is being reinforced.
  • A streamlined management structure with a 20 percent reduction of management positions is to be implemented in the first quarter of 2021. To simplify and clearly define responsibilities, the functional process organization (matrix) will be focused on core functions of Lufthansa Group Airlines. For all other areas, a new management model with clearly assigned responsibilities (decentralized or centralized, depending on the process) will be introduced.
  • The administrative office space will be reviewed worldwide and reduced by 30 percent in Germany.

Lufthansa Group Press Release

Lufthansa A380
Lufthansa A380

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