Last Update: at 14:29

Two million Euros of losses a week

Lauda is launching an urgent cost cutting programme

Ryanair's Austrian subsidiary is missing its earnings forecast, which had already been revised downwards. Lauda is currently losing almost two million euros a week.

There is at least one constant in the young life of Lauda. Despite rising passenger numbers and rapid fleet expansion, the low cost airline so far missed every budget that had been set. In its first business year, parent company Ryanair originally expected a loss of 100 million Euros for its Austrian subsidiary. It ended up being 139.5 million in 2018/19.

For the financial year 2019/20 , which will end at the end of March, Dublin initially forecast a strong improvement to minus 50 to 0 millions. But already last October, management had to correct this forecast. At that time, it was said that the company would probably lose between 70 and 75 million euros. That too was still too optimistic. The loss will be around 90 millions, Lauda boss Andreas Gruber announced last week in a letter to employees, which aeroTELEGRAPH has seen.

No pay rises

Gruber blames the difficult conditions in the two main markets Austria and Germany. The price war with Eurowings and Austrian Airlines has resulted in average ticket revenues being around 15 euros lower than budgeted, he says. Therefore, the company is currently losing «almost two million euros per week». In October, Ryanair CEO Michael O’Leary had still spoken of a weekly minus of one million at Lauda.

Because the results are so bad, Gruber announced an urgent cost cutting program for Lauda staff. On the one hand, the current collective bargaining agreement will be suspended for all new hires as of January 1. On the other hand, there will be no pay rises from April 1.

All costs under review

But that is not enough. From now on, all costs in the company are to be scrutinized, announced Gruber. All expenses that are not necessary to bring passengers to their destination  «safely, reliable and on-time» are being reduced or eliminated, the Lauda CEO said in the letter. The current losses are being funded by Ryanair, but this could not go on forever, he further explained.

Despite the difficulties, Lauday is still planning to expand its fleet to 38 aircraft, plans to hire 300 new pilots and flight attendants and is expecting to expand its bases in Vienna, Palma and Zadar, Gruber continued. At the same time, Lauda is trying to sustain the bases in Düsseldorf and Stuttgart – against the aggressive competition of the Lufthansa subsidiaries, which, according to the Lauda CEO, offer prices below costs. To achieve this, however, one must work together, Gruber told his team.

We’re on a break. Due to the Coronavirus pandemic we have decided to halt our English publication for a while and concentrate on our other ventures. But we’ll be back. Meanwhile you can find all our news, insights and more on our German site.