On April 30, Lufthansa confirmed that it would be shutting down all of low cost arm Eurowings’ growth plans for the rest of this year after it reported a loss of EUR257 million for the first quarter of 2019. This follows similarly bad figures from the same period last year, which were, however, blamed on the high integration and start-up costs related to the part acquisition of the now bankrupt airberlin.
The EUR257 million loss for this year came as a surprise for many. Eurowings cites heavy competition at its main bases in Frankfurt, Munich and more notably Vienna as its main issues. “We vigorously defended our market position in the hubs and were prepared to accept lower yields,” explained Lufthansa CFO Ulrik Svensson said. He added, “The yield pressure [in Vienna] was much more striking than in Frankfurt or Munich.”
Lufthansa has therefore, taken the decision to bring Eurowings’ capacity growth target for the year of 2019 down to 0% from 2%.
Lufthansa added that available capacity on short haul routes was way higher than actual demand, meaning emptier planes and less profits. The winter season is always a difficult one for most of the European airlines, with the summer being the complete opposite.
Not only was short haul bad for Eurowings, but also on the long haul side. Svensson said: “The performance is not where we want it to be."
He continued, “We are confident [performance] will improve as we shift to Frankfurt and Munich,” where Eurowings will be basing a large part of its fleet in the coming future.
The Lufthansa Group as a whole also published very unsatisfactory results, amounting to a total net loss of EUR349 million for the first quarter of 2019 which was much worse than analysts had estimated. SWISS, Austrian and Lufthansa were hit possibly the hardest but were able to compensate for much of the short haul loss with long haul traffic figures. Lufthansa Cargo was also hit had with operating profit decreasing by 67%.