Deutsche Lufthansa AG will deepen the integration of its brands in a savings drive aimed at boosting annual earnings by 1.5 billion-euro ($2 billion) by 2014.
The cost cuts will come through increased synergies and restructuring among brands that include cargo, engineering and catering, and are necessary to finance future fleet investment, Europe’s second-biggest airline said today in a statement.
The profit-improvement plan -- named SCORE, or Synergies, Costs, Organization, Revenues, Execution -- follows on from a package that saved 1 billion euros between 2008 and 2011. Cologne, Germany-based Lufthansa has already trimmed capacity growth for the current 12 months to 3 percent from a planned 9 percent after saying Sept. 20 that 2011 operating profit would fall short of the previous year’s 876 million euros.
“It’s the right step, and if successfully implemented will be a major move forward on the road toward achieving long-term profitability targets,” said Hartmut Moers, an analyst at WestLB in Dusseldorf, who recommends buying the airline’s shares.
Lufthansa fell as much as 2.5 percent and traded 1.2 percent lower at 11.05 euros as of 3:45 p.m. in Frankfurt.
The integration of purchasing capabilities is among the planned synergies, Lufthansa Cargo head Karl Ulrich Garnadt said last week. Stefan Lauer, head of group airlines, said in an internal newsletter that if Lufthansa can’t improve its margin beyond 3 percent it will become a “second division” carrier.