Austrian enters next restructuring phase

3 September 2009

In the last week, the Austrian Airlines Group presented the first measures of its sustainability package designed to increase its long-term competitiveness. Management has now decided on the next measures: to replace 50-seater aircraft with larger aircraft from the existing fleet.

The reason for this decision is that the collapse in the high-price business travel market no longer allows the airline to operate aircraft with 50 seats profitably. Larger aircraft offer much lower unit costs.

Austrian are planning to take the 50-seat Canadair Regional Jets, which are operated by Tyrolean Airways under the brand Austrian arrows, out of service at the beginning of the 2010 summer flight schedule. In addition, they intend to reduce the Dash 8-300 fleet and replace them partly with Dash 8-400. In total Austrian will reduce the 50-seater fleet by up to 14 aircraft. The routes that have been operated with 50 seater aircraft so far will be served in future with existing larger aircraft. In addition, Austrian intends to use larger aircraft that are currently only used for charter flights, for scheduled flights. These measures will permit the Austrian Airlines Group to serve the network at much lower unit costs.

Manfred Helldoppler, Managing Director of Tyrolean Airways: “The market has increasingly shown over the last few months that aircraft with a capacity of 50 seats are increasingly difficult to operate profitably. This applies both to transfer traffic and in particular to point-to-point traffic, because customers are ever less willing to pay high fares. We are also unable to avoid this market and demand trend and must take account of it when looking at our options.

“We are holding to our strategy of being a network carrier with a focus on the markets in Central and Eastern Europe. However, we must respond to the massive changes in the market. These changes are structural. We anticipate that demand for the high-price business travel segment will remain weak in the coming years. We must adjust our fleet structure to this development.”

Austrian Executive Board Members Dr. Peter Malanik and Dr. Andreas Bierwirth commented. “We are currently checking our entire network – all routes, frequencies and transfer points – and will adapt these to the market situation accordingly. The following criteria are paramount for us in this regard: We want to increase profitability, despite lower yields, by using larger aircraft. And we want to retain the valuable transfer flows and the network in the core CEE market."

The Austrian arrows fleet contains 55 aircraft that are mostly positioned in Vienna. Therefore the reduction of the fleet of up to 14 aircraft will take part in Vienna. Shrinking the fleet will also result in the reduction of jobs. Austrian anticipates that it will need up to 400 fewer full-time positions at Tyrolean and in other divisions of the Austrian Airlines Group.

This reduction forms part of the overall loss of 1000 full-time jobs within the Austrian Airlines Group by mid-2010, announced last week. In the case of the 50-seater fleet, the airline is also taking efforts to make the reduction in jobs as socially acceptable as possible. Austrian will therefore work with the Works Councils to examine alternative options such as part-time concepts. Here as well, however, it may unfortunately not be entirely possible to avoid redundancies. In the case of cabin crew, the reduction in staff numbers may be possible through normal attrition.

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