A major airline has ceased its regional operations due to significantly higher kerosene prices resulting from the Iran conflict. Global oil prices have surged since the onset of tensions in the Middle East in late February, leading Lufthansa to close its subsidiary airline CityLine as part of an accelerated corporate strategy. This decision, effective from April 18, aims to curtail losses incurred by the struggling airline.
Lufthansa is also downsizing its long-haul fleet, reducing the number of intercontinental aircraft to six by the end of the summer schedule. The company announced that the remaining four Airbus A340-600s will be phased out in October, marking the end of this aircraft type’s era within Lufthansa.
The airline disclosed that while a significant portion of its kerosene consumption is hedged at around 80% based on crude oil prices, the remaining 20% still needs to be procured at higher market rates. To mitigate this cost impact, Lufthansa plans to cut down this expensive fuel requirement by approximately 10%.
Till Streichert, the Chief Financial Officer of Lufthansa Group, emphasized the necessity of swift fleet and capacity adjustments in response to the escalating kerosene expenses and geopolitical uncertainties. Streichert highlighted the strategic realignment towards enhancing competitiveness in the short- and medium-haul segments, noting that the decision to remove CityLine had been in the pipeline before the current crisis but was expedited due to prevailing circumstances.
Acknowledging the implications for employees at CityLine, Lufthansa assured that ground staff had already secured positions at the newly established Lufthansa Aviation GmbH. Furthermore, cockpit and cabin crew were offered transfer opportunities with comparable compensation terms at Lufthansa City Airlines. Any disparities in working conditions would be offset by compensation payments as part of the transition process. CityLine, established in 1963, had been an integral part of Lufthansa for over five decades.