Lufthansa To Axe 3,500 jobs Amid Turbulent Times

Deutsche Lufthansa, Germany's largest airline, plans to axe 3,500 jobs as part of it's global cost-cutting programme.

"We can only safeguard jobs for the long term and create new openings if we reorganise the administrative functions and accept job losses now," said Christoph Franz, chief executive at Lufthansa in a statement.

The cull, which Lufthansa calls SCORE, is around 3 percent of its global workforce and is intended to offset high fuel prices which are continually squeezing margins, a weak European economy and tough competition from low-cost carriers and Middle East airlines. The SCORE programme was launched in early 2012 and was intended to improve the group's operating result by €1.5bn by the end of 2014.

The group said that one third of the savings is to come from reducing staff costs.

Lufthansa, which has a workforce of around 117,000 people worldwide, sees 2012 operating profit declining by mid-hundreds of millions of euros, which excludes possible costs related to the cost-cutting programme.

Lufthansa generated revenue of €6.6bn in the first quarter of 2012, up 5.6 per cent from last year. However, the aviation group then reported an operating loss of €381m in the first quarter of 2012, a fall of €212m compared with the figure for the same quarter a year ago. Subsequently, the net result for the period was down €397m. The increase of €110m is largely due to the negative changes in the time value of hedging options recognised in the first quarter of last year, it said.

"The increase was mainly due to higher traffic revenue, which in turn stemmed from a higher sales volume and price increases in the passenger business," said a group statement. "However, increased fuel costs, the air traffic tax imposed in Germany and Austria and the costs of emissions trading in force in Germany since 2012 all had an adverse effect on the Group's operating result."

Meanwhile, Franz hit out at politicians and the hike in taxation.

"Higher taxes, fees and charges put a massive strain on our quarterly result. It was well down on last year despite record revenue," said Franz in a statement. "We cannot wait until politicians also recognise the damage that one-sided taxes and charges do to aviation and to Europe's reputation as a place to do business. Our SCORE programme is our own response to these additional burdens. It will safeguard Lufthansa's position as number one in Europe and enable us to maintain our place in global competition in the long-term."

Lufthansa shares rose sharply after the release, rising 2.7 percent to change hands at €9.965 per share.