Lufthansa Provides Capital Injection For Austrian

by Lufthansa Flyer | Mar 15, 2012 | Airlines | 0 comments

In absolutely great news from Vienna, Austrian and Lufthansa today announced that Lufthansa will back Austrian with a capital injection of up to 140 million Euros to help Austrian through their challenges. Part of the arrangement may call for flight staff to reorganize and adopt the Tyrolean Air model for employee agreements, but that was wide expected. What I am most happy about is that Austria will be able to perserve its national carrier and be given every chance to succeed. In the press release below, Austria also indicated that it will continue to fly its full compliment of flights and will overhaul the cabins of their long haul aircraft.

To catch up on the events surrounding Austrian, you can read my previous post here.

The Press Release By Austrian:

Austrian Airlines receives capital for all-round renewal
· Lufthansa authorizes capital injection of up to 140 million euros
· Work Program gets green light on all committees
· More than 200 million euros for new aircraft and new cabin

East Meadow, NY, March 15, 2012 – Yesterday, Austrian Airlines was given the green light from Frankfurt for its Work Program that was presented in January 2012. Parent company Lufthansa will support Austrian Airlines with a conditions-based capital increase of up to 140 million euros. The funds will be used to prepare the harmonization of the medium-haul fleet and the consequent restructuring. As part of this, a transition of the flying staff of Austrian Airlines to the collective agreements of Tyrolean Airways might take place. Therefore, nothing will change for customers: Austrian Airlines will continue to be called Austrian Airlines after the restructuring phase and continue to operate a fleet of 80 aircraft to 130 destinations worldwide. It is planned to convert the cabin of the company’s entire long-haul fleet of 10 aircraft over the next upcoming winter. In total, 200 million euros will be invested over the next two years.
Austrian CEO Jaan Albrecht said the following: “We now have the capital needed to implement our plan. Austrian Airlines will continue to be the largest domestic airline, but in a more modern and competitive setting. Its new cost structure will provide the basis for further growth in the Lufthansa Group.”

An overview of the Work Program:
In the past 8 weeks, a total of around 180 million euros in cost reductions or revenue increases has been identified. These include new agreements with partners, an adjusted route network and harmonization of the fleet. Most recently, our politicians confirmed that location-related costs in Vienna will be reduced as well. This consists of a reduction of the tax on flight tickets and the stockpiling of oil, as well as a new fare model with Vienna Airport. A better approach flight route into Vienna will be developed in collaboration with AustroControl. Charges for the licensing of pilots are to be reviewed again this year. With the help of a transition to group subsidiary Tyrolean Airways, additional funds can be raised.

· Route network and fleet harmonization: A new route network plan with a strategic orientation to our home market of Austria and strong Eastern European markets has been developed. In the future, Austrian will increase flights to Sofia, Bucharest and Belgrade. A larger aircraft is to be deployed on the route to Tel Aviv. The routes to Gothenburg, Sochi and Donetsk will be cancelled. Austrian Airlines will increase the flights to London and Barcelona, as well as intra-Austrian flights to Klagenfurt and Linz.

Preparations have been made for the removal of eleven medium-haul aircraft of the type Boeing 737 from the fleet and acquisition of seven mid-range Airbus A320 family. This means that Austrian Airlines will have a harmonized mid-range fleet of 29 Airbus. Retraining of the pilots will begin in March.

Starting this fall, it is planned to completely convert the cabins of the ten aircraft that make up Austrian’s long-haul fleet, adding new seats and an inflight entertainment system.

· Location: An agreement has been reached with Vienna Airport to secure the companies’ common future by strengthening transfer traffic and long-haul development. In total, the Vienna hub and long-haul product at the location should continue being built up. Good preconditions have also been created for doing this with the new Skylink Terminal, which will open its doors in June 2012. In the field of handling, potential savings have been identified as well, and the framework conditions for a longer-term agreement have been defined.

· Costs and revenues: By extending contracts, creating more favorable conditions for office items, building maintenance and car fleet reduction, substantial amounts running into millions of euros will be saved in the field of administration. Meanwhile, on the revenue side, a range of measures is planned, including expansion of corporate customer business by means of cooperations with the Lufthansa Group.

· Staffing: Despite highly intensive and fair negotiations, it proved impossible to reach an agreement over the “Modernization of Collective Agreements” work package for the flying staff. The measures discussed would not themselves have been sufficient to stop the automatic increase in costs from seven percent a year irrespective of the economic trend and success of the company. A transition is now being prepared to the subsidiary Tyrolean. With its cost level, Tyrolean offers a sustainable, forward-looking and competitive foundation.