Carsten Spohr, Lufthansa Group’s CEO, has suggested that the airline plans to reduce fares for passengers during 2017. His comments came as part of an interview with German newspaper ‘Westdeustchen Allgemeine Zeitung’.
In his comments, he hinted that the fare cuts this year would be less than the fare cuts that took place during 2016, pointing to slightly higher fuel expenses that are expected during 2017. To offset the impact of a modest bump in fuel costs, he suggested that savings would be found in other areas of their income statement.
His comments tie into the ongoing negotiations with his pilots as they try to strike a labor peace that has been elusive thus far: ‘For this reason, we are striving for lower long-term airport charges, for example, and we have to create competitive and thus future-proof structures in personnel costs.”. These comments also came at the same time that a negotiating period between the airline and the pilot’s union came to an end without a resolution.
He did not suggest specific percentages as far as fare cuts are concerned but in reading between the lines I would assume that the cuts will be in the low single digit percentage point range.
As part of the interview he did plant a hint that certain markets may be at risk for continued Lufthansa service: “There are market segments in which you can no longer be profitable with our personnel costs of our core brand Lufthansa.” He further added that since passengers expect lower fares, a correlating reduction in expenses must be executed. Again, suggesting to labor that with a reduction in fares necessary to remain competitive, labor must move towards accepting concessions to help Lufthansa remain competitive.