Work Programme: two weeks remain to close the gaps

March 1, 2012 flight2000it

This afternoon, the Executive Board of Austrian Airlines reported to the Supervisory Board on the Work Programme it first presented in January, a package of measures designed to save the company 220 million euros. If implemented, the reform package will enable the country’s largest airline to return to profit. So far, substantial contributions have been made by around 60 suppliers, the company’s route network adjusted with the hub Vienna, relief negotiated from charges on transfer traffic through Vienna, and preparations made for harmonising the company’s medium-haul fleet. There is also readiness amongst the country’s political classes to support Vienna in its role as the hub. However, it has not yet been possible to achieve a final result. It has been decided to set a period of grace of two weeks to work on the issues of Staffing and Politics.

Austrian CEO Jaan Albrecht: “In the past six weeks, we have looked at the value of every single euro in our administrative divisions in an effort to cut costs by more than 100 million euros, and find possibilities to increase revenues by 60 million euros. But that is not going to be enough to take Austrian Airlines into the black in a way that will last. We now want to use the two weeks we have gained to close the gap which remains.”

An overview of progress made in the Work Programme:

• Route network and fleet harmonisation: A new route network plan has been developed focussing on strong East-markets. In future, Austrian will fly to Sofia, Bucharest and Belgrade more often. Tel Aviv will be served by a larger aircraft twice a day. Transfers via the European hubs of Barcelona and London are also to be boosted.

Preparations have been made for removing eleven medium-haul aircraft of the type Boeing 737 from the fleet, and acquiring seven Airbus of the A320 family. Lufthansa today reconfirmed its support for the project.

Expansion of the long-haul fleet is scheduled for 2013/2014.

• Location Vienna: A series of measures including growth incentives to strengthen transfer traffic and the long-haul segment have been agreed with Vienna Airport. These are expected to make it possible to continue expanding Vienna as a hub and to increase the long-haul flight programme; good preconditions for doing this already exist thanks to the new Skylink Terminal, which is to being operating at the beginning of June 2012. In the area of handling, too, potential cost-savings were identified, and the framework conditions defined for a longer-term agreement. Relief from ticket tax has also been negotiated with political representatives: This tax will place additional strain of around 30 million euros a year on Austrian Airlines.

While Austrian Airlines has received a series of positive signals from politics, the necessary goal has not yet been achieved. Jaan Albrecht:

“I am pleased to hear our politicians voice such positive signals. But at the same time, I expect such signals are to be transformed into concrete action in the next two weeks. This is not just about supporting an airline; it is about safeguarding the role of Vienna Airport as an international hub.” Austrian Airlines brings some 11 million passengers to Vienna Airport every year, more than half of whom are transfer passengers. The CEO described the inflexibility shown by Austro Control as ‘disappointing’. The airline had proposed concepts for improving the approach flight into Vienna and a reduction in bureaucracy in licences. Both these proposals fell on deaf ears, although they would also have had positive side-effects from an environmental viewpoint.

• Costs and revenues: By extending contracts and creating more favourable conditions starting from office items over building maintenance up to reduction of car-fleet, substantial amounts can be saved, running into millions of euros. Areas close to the customer are not affected by such measures. On the revenues side, meanwhile, a number of measures are being planned, including expansion of business with providers within the company through cooperations with Lufthansa Group. Online sales are also to be improved via austrian.com. • Staffing: Despite intense but fair negotiations, it has proved impossible as yet to reach an agreement over the “Modernisation of Collective Agreements” work package. The measures discussed would not have been sufficient themselves to stop the automatic increase in costs from seven percent a year irrespective of the economic trend and success of the company.