Austrian Air Unveils EUR425 Mln Cost Cuts

Financially strapped Austrian Airlines unveiled on Friday a EUR425 million euro (USD$555.9 million) cost-cutting initiative to be implemented by 2012 to withstand a projected fall in passenger volume.

Some EUR225 million in cost reductions will be implemented this year and a further EUR200 million by 2012, said the money-losing airline, which is to be taken over by Germany's Lufthansa in a deal signed last month.

Austrian said it would cut capacity about 10 percent compared with 2008 to achieve savings of EUR115 million. Flights to Mumbai, Burgas and Baia Mare would be dropped by the end of March.

A further EUR110 million in savings this year would be achieved from implementation of more flexible working hours, temporary deferral of salary and pension payments, and a requirement to take accumulated staff leave.

Through these savings, Austrian Airlines intends to attain a margin on earnings before interest and tax of around 6-7 percent, which would provide a basis for future growth, the company added.

On Thursday evening the troubled airline disclosed that chief executive Alfred Oetsch had resigned. His duties on the management board will be assumed by Chief Operations Officer Peter Malanik and Chief Commercial Officer Andreas Bierwirth.

Oetsch said his departure was "designed to enable a new beginning at the company, including at the level of management".