Lufthansa vows not to let up on cost cutting despite an 11 percent fall in profits in 2014. But as Grace Pascoe reports the German airline is facing tough competition from budget airlines and is still struggling to reach an agreement with pilots to prevent further costly strikes.
Cost cutting continues at Lufthansa. The German airline is struggling to compete with budget rivals. And profits have dropped nearly 11 percent in 2014 to 252 million euros. It's CEO Carsten Spohr knows change is needed. SOUNDBITE (ENGLISH) LUFTHANSA, CHIEF EXECUTIVE OFFICER, CARSTEN SPOHR, SAYING: "Our company must become better and faster. We know that. We are especially working on improving the profitability of our core in order to be competitive in the long term. For that to be achieved, unit costs must continue to be reduced, as we have successfully done in the past four years." Lufthansa's high cost base is holding them back. Its well paid pilots aren't giving up their wage packets without a fight Striking 10 times last year. Competitor Norwegian Air has just resolved its strike problem and is set to expand...and fast. Olaf Storbeck of Reuters BreakingViews... SOUNDBITE (ENGLISH) REUTERS BREAKING VIEWS, OLAF STORBECK, SAYING: "It boils down to the fact that Norwegian Air as a newcomer has completely different internal culture and staff has different expectations. At Lufthansa pilots are used to a much more generous pay package and they are just defending this severely and fiercely." Other rivals, both short and long haul, include Ryanair, EasyJet, Emirates and Etihad. For Lufthansa to grow concessions from staff are needed. (SOUNDBITE) (German) LUFTHANSA CEO, CARSTEN SPOHR, SAYING: "If we believe that measures make sense and are necessary, we will implement them, even with strong headwinds. We are not looking for a conflict but ,if necessary, we will not shy away from it either if we are convinced that we are implementing a long-term interest for the company." Lufthansa is ordering nine new planes at a cost of 1 billion euros to help the modernisation process. But even the lower oil prices aren't helping that much - Lufthansa's fuel bill is due to fall but not by as much as estimated.