Lufthansa Group has outlined its turnaround plans for Eurowings (EW, Düsseldorf Int'l) with the low-cost platform to embrace a more orthodox, streamlined business model based on LCC fundamentals. Last week, the German carrier holding blamed sustained overcapacity in the European market for its decision to cut its full-year profit forecast from the previously anticipated 6.5% to 8%, to 5.5 to 6.6%. It singled out Eurowings as needing additional restructuring.

According to a Capital Markets Day presentation, Lufthansa said Eurowings' profitability had suffered as a result of business model dilution; namely increased fleet complexity through the addition of widebody aircraft and long-haul flying, and the use of multiple AOCs which has resulted in higher integration unit costs.

As such, to remedy the situation, the Group outlined a three-year turnaround plan in which Eurowings will aim to achieve a total CASK (cost per available seat kilometre) reduction of 15% by the end of 2022. It will achieve this by exiting the long haul segment beginning later this winter season when said flights out of Düsseldorf Int'l, Frankfurt Int'l, and Munich will start to be transferred to the group's full-service carriers. A turnaround plan for Brussels Airlines (SN, Brussels National), whose integration into the Eurowings fold will also be terminated, will be presented during the third quarter of this year.

Lufthansa Group said it has already begun consolidating its German operations under a single AOC following the sale of LGW - Luftfahrtgesellschaft Walter (HE, Dortmund) to Zeitfracht Gruppe earlier this year. In addition to the seventeen Dash 8-400s it wet-leases from its former subsidiary, Eurowings's German network operations also rely on twenty-six A319-100s and fourteen A320-200s that it wet-leases from germanwings (4U, Cologne/Bonn) as well as the sixteen A319s and forty-one A320-200s operated under its own AOC. It also wet-leases nine A319s and ten A320-200s from its Austrian unit, Eurowings Europe (E2, Vienna).

In 2019, the group aims to have Eurowings flights operated by one AOC at each of its Düsseldorf Int'l and Berlin Tegel bases while Eurowings Europe's Munich base operations will be transferred to an unspecified German AOC. According to Group CEO Carsten Spohr, whether Eurowings is rebuilt around its own AOC or around germanwings will depend on the outcome of talks with cabin and flightcrew unions. However, he hinted that the germanwings AOC will be wound down and closed from Summer 2022 as per an existing collective labour agreement. Pilots from the carrier will then be transferred to the Lufthansa mainline operation.

In addition to streamlining its subsidiaries, Lufthansa Group will also streamline its fleet operations. Beginning later this year, Eurowings will cease the use of wet-leased capacity while its contract with LGW and its Dash 8-400s will be wound down by the beginning of 2021. Overall, Eurowings' fleet will be streamlined around the A320 Family of jets with at least thirty A320-200neo to be taken from Lufthansa Group's order book. Its widebody fleet - five A330-200s, three A330-300s, and two A340-300s - will likely be exited from Eurowings service starting this winter season as its longhaul flying winds down through the end of 2020.

In terms of its interest in Condor (DE, Frankfurt Int'l), Lufthansa Group's CFO, Ulrik Svensson, said that the firm was "unlikely" to be the winning bidder for the Thomas Cook Group subsidiary given its "substantial" pension fund obligations.