Lufthansa plans yet another airline to cut labor costs

Deutsche Lufthansa AG will start another short-haul airline next year, a strategic move intended to cut labor costs by reducing the bargaining power of the company’s powerful unions. 

City Airlines will take to the skies in summer 2024 and offer feeder flights to more profitable long-haul operations at Lufthansa’s Frankfurt and Munich hubs. The airline will hire staff on new contracts, reducing the relatively high cost structure of the airline’s existing short-haul operations.

“This is the only way for us to grow and sustainably strengthen the hubs in Munich and Frankfurt,” Jens Fehlinger, the managing director of City Airlines said in a statement. 

City Airlines will begin operations with Airbus SE A319 aircraft and Lufthansa is evaluating the possibility of adding Airbus A220 or Embraer aircraft, according to the statement. Bloomberg News previously reported that Lufthansa was looking at a regional jet order. 

Lufthansa Chief Executive Officer Carsten Spohr has pledged to boost the airline’s earnings margin to at least 8% by 2024, a move he said was needed to reduce debt. Lufthansa, which will report third-quarter earnings on November 2, had an earnings margin of 4.6% in 2022.