Lufthansa to Reintroduce Premium Economy Class

Lufthansa, the Germany-based airline, is considering cost savings through several measures, and may reintroduce its premium economy class of seating.

In a letter addressed to the company employees, Carsten Spohr, a member of the airline company’s board, said that the company is aiming to achieve €1.5 billion in savings through several cost cutting initiatives. One such initiative is removal of first class on several routes and the reintroduction of premier economy class on some routes.

Spohr emphasised in his letter that the company is in difficult phase, and is affected by issues such as air traffic control, carbon emissions, the ban on night flights, and competition from low-cost airlines. The company is planning to cease passenger capacity expansions in 2012, and has withheld all plans to upgrade its intercontinental fleet, Spohr added. The company is also looking at job cuts and to negotiate airport fees, in order to lower the costs.

In 2011, the Lufthansa Group reported a loss of around €13 million, and recently the company sold off its subsidiary, bmi, British Midland International, airline to International Airlines, the parent company of UK-based airline company, British Airways.

In an interview with Bloomberg Businessweek, Andreas Bartels, a Lufthansa spokesman in Frankfurt, said, ‘Everything will remain just as it is for customers, there is Lufthansa and Germanwings. But duplicated functions such as bookings control, route planning and ticketing can be merged behind the scenes to save money.’

The company also owns Austrian Airlines, which reported an operating loss of €62m in 2011.

European Commission Releases Statement on bmi Sale

The European Commission (EC), the executive body for the European Union, has released a statement defending its decision to approve the sale of British Midland International (bmi), an airline owned by Germany-based Lufthansa, to British International Airlines Group (IAG), the parent company of British Airways.

Earlier Virgin Atlantic, an airline subsidiary of UK-based Virgin Group, had announced its intention to appeal against the sale of bmi, although the sales process will not be affected by this appeal. Virgin Atlantic has claimed that the EC has approved the sale too quickly, and the 14 airport slots that BA are giving up at Heathrow airport, as a proviso of the £172.5 million deal, were insufficient to ensure healthy competition in the UK aviation market.

In a statement, the EC has clarified its stand by saying, ‘We are confident that the commitments proposed by IAG address all competition issues identified and we stand by our decision to clear the transaction subject to these conditions.

In this case, a decision was reached in 35 working days, which is not particularly fast. For example, out of 319 adopted merger and acquisition decisions in 2011, 98 percent were adopted within this timeframe.

Moreover, as described in our best practices guidelines, the commission held in-depth pre-notification contacts with the parties as early as November 2011, well before the notification took place on February 10, 2012.’

Virgin Atlantic will be able to appeal to the General Court of the EU within two months of publication of a full report by the EC on the sale of bmi to IAG.

British Airways takeover will lead to 1,200 job losses at BMI

The takeover of BMI buy the parent company of British Airways (IAG) will lead to a possible 1,200 job losses, the company announced today.

The takeover was approved by the European Commission in March 2012 after the Commission looked into the integration of the two airlines operations at Heathrow Airport.

Most of the job losses will be at BMI’s head office at Castle Donington in Derbyshire.  However, British Airways were keen to stress that up to 1,500 jobs have been saved by the takeover, including 1,100 cabin crew, pilots and engineers and up to 400 passenger service personnel at Heathrow’s Terminal 1.

Keith Williams, British Airways’ chief executive, said ‘BMI is heavily loss making and is not a viable business as it stands today. Our proposals would secure around 1,500 jobs that would otherwise have been lost. As we look to restructure the business and restore profitability, job losses are deeply regrettable but inevitable. We will work with the unions to explore as many options as possible and are already working with industry partners.’

He also said ‘This deal is good news for our customers and will offer new destinations, new routes and new schedules in due course. For customers with BMI bookings to or from Heathrow this summer, it is business as usual and customers can continue to book with confidence.’

BMI was previously owned by German carrier Lufthansa and had been losing over £150m per year before the takeover, carrying 3 million passengers per year and flying to 25 countries around Europe.