Deep cuts at Brussels Airlines: reductions in fleet, workforce and destinations

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This morning, the Brussels Airlines management presented a new turnaround plan to tackle the impact of the coronavirus pandemic. The airline will reduce its workforce by 25%, will shrink its fleet by 30% and will offer fewer destinations.

Like any other airline, Brussels Airlines has been severely hit by the coronavirus pandemic: in 2020, the airline expects a 60% lower demand while experts and analysts expect that demand for 2021 will be 25% lower than before the crisis.

Hence the airline introduced a turn-around plan:

  • 25% fewer destinations than originally planned in Summer 2020 (from 78 to 56 European destinations, from 20 to 18 long-haul)
  • a reduction of the fleet by 30%, from 54 to 38 aircraft:
    • from 10 to 8 long-haul aircraft – all A330-300s –
    • from 38 to 30 short- and medium-haul – to be standardised on the A320 –
    • cancellation of the wet-lease contract with CityJet for 5 CRJ-900s
  • The reduction in personnel costs by reducing the number of jobs by 25% (or approximately 1000 people) by a combination of voluntary departures, early retirement, part-time and seasonal work, and layoffs if still needed
  • Together with the social partners, the number of forced redundancies will be reduced to a maximum extent
  • The reduction of overhead, operational costs and the increase of operational efficiency, among others by improving productivity and further standardising the fleet
  • The simplification of the employee reward set-up, aiming at remaining an attractive employer while controlling the future cost evolution

The fate of the Düsseldorf base is still undecided and will be tied to the ongoing discussions between the Belgian government and Lufthansa, which remain essential. Brussels Airlines hopes for a positive outcome on state aid of 290 million euros from the ongoing talks. In this context, the company will seek help from its German parent company for the restructuring costs.

This is a difficult announcement for the workers of Brussels Airlines and their families, in a context where concern is already omnipresent. I will see the unions this afternoon (Tuesday) with ministers Alexander De Croo and Nathalie Muylle,” Prime Minister Sophie Wilmès announced on Twitter this Tuesday.

According to Finance Minister De Croo, “it is necessary that a credible future plan be put on the table, providing sufficient guarantees as to the role that Brussels Airlines will play after the crisis. We do not want a simple liquidation scenario, there also has to be investment. We are waiting for a clear signal from the German parent company.”

Press release: Brussels Airlines takes substantial and indispensable measures to ensure its survival and create a sustainable future for the company

The extremely negative impact of the coronavirus crisis on the company’s financials and the ongoing very low demand for air travel urge Brussels Airlines to take substantial and indispensable measures to guarantee the survival of the company. To grant a future for Brussels Airlines, the carrier needs to structurally reduce its costs to a competitive level. In addition, to overcome the present unprecedented crisis, the company asks for support from both, its shareholder Lufthansa and the Belgian government.  Within its turnaround plan, Brussels Airlines is structurally tackling its cost structure and optimises its network by cutting marginally profitable and unprofitable routes, resulting in a fleet reduction of 30%. The overall size of the company, and as a consequence of its workforce, will be 25% smaller. As a socially responsible employer, Brussels Airlines will work together with its social partners to reduce the number of forced dismissals to an absolute minimum. The company is confident that with its turnaround plan it will be able to safeguard 75% of its employment and grow again in a profitable way as soon as the demand for air travel has recovered to a new normal, which is expected as of 2023. Achieving structural profitability is essential to secure the company’s future and new investments, while also being able to protect itself against possible new headwinds.

Across the world, the Coronavirus crisis is putting unprecedented pressure on airlines with a total revenue impact expected to exceed €240 billion. Incoming bookings dropped by more than 60% and cancellations reached record heights. As a consequence, many airlines across Europe and beyond are obliged to go for massive job cuts. Brussels Airlines is unfortunately not spared by the crisis. Since the temporary suspension of all its flights (starting on March 21st), the company loses one million euro a day due to revenue losses and costs that cannot be avoided, such as aircraft leasing and maintenance costs. On February 28th the company announced for the first time an impact on the demand for air travel. The situation deteriorated week by week, with days where the number of cancellations exceeded the number of incoming bookings. Still today, demand is very low and according to analysts and experts, demand for air travel in 2021 is expected to be 25% lower than before the crisis and the industry can only count on demand back at 2019-levels by earliest 2023.

“We started the year 2020 with positive results in terms of number of passengers and revenues; and for this summer, we planned a strong leisure offer as we could compensate part of the business we lost due to the bankruptcy of Thomas Cook Belgium. But the Coronavirus pandemic is hitting Brussels Airlines extremely hard. We had no other choice than to temporarily suspend our flights as of March 21st and introduce technical unemployment for the entire company. This unprecedented crisis has worsened our financial situation obliging us to take substantial and indispensable measures. The restructuring is urgently needed in order to survive the current crisis and to become structurally competitive in the future”

– Dieter Vranckx, CEO of Brussels Airlines –

 

A turnaround plan focusing on the survival of the company and creating the base for structural profitability

The Brussels Airlines management presents today its turnaround plan to the social partners. With the plan, the Belgian airline wants to pull the company out of the crisis that severely hit the financials of Brussels Airlines. At the same time, the airline focuses on structural profitability in order to enable solid growth. The carrier, therefore, needs to reduce its overall costs, increase efficiency and productivity.

A sufficiently positive EBIT margin will allow the airline to secure its future, invest in its fleet and to further develop its hub at Brussels Airport. Furthermore, the Belgian home carrier will make sure to continue playing a pivotal role in the Belgian economy and to remain one of the core airlines within the Lufthansa Group.

The main measures of the turnaround plan are:

  • The review of the network by focusing on the market needs and by optimising the route profitability.
  • The adaptation of the fleet according to the network optimisation: from 54 to 38 aircraft (-30%)
  • The reduction of the personnel costs by reducing the number of jobs by 25%
  • Together with the social partners, the number of forced redundancies will be reduced to a maximum extent.
  • The reduction of overhead, operational costs and the increase of operational efficiency, among others by improving productivity and further standardising the fleet.
  • The simplification of the employee reward set-up, aiming at remaining an attractive employer while controlling the future cost evolution.

Brussels Airlines’ intention is to investigate as many solutions as possible to limit the number of forced dismissals. The company, therefore, invites its social partners to assess together all alternative measures allowing to reduce the social impact to a maximum extent; measures like seasonal contracts, pensions, part-time work, unpaid leave, volunteers who would seek their future elsewhere – to name just some options.

 

“The strength of our company are our employees and we do everything we can to protect our staff as much as possible. The way how we deal with the social impact is for us as important as the end goal itself. It’s the management’s responsibility to make sure that our company can survive the crisis. But let’s be clear, the intention is not only to survive but to build a healthy company with a long-term structural profitability and growth perspectives. We strongly believe in the plan and herewith in the future of Brussels Airlines.”

– Dieter Vranckx, CEO of Brussels Airlines –

While the turnaround plan is indispensable to overcome the crisis, the ongoing discussions with both the Belgian government and Lufthansa remain essential. The Belgian home carrier hopes for a positive outcome of the talks with the Belgian authorities on the financial support that is needed to overcome the consequences of this unprecedented crisis, while it seeks for the assistance of Lufthansa for the restructuring costs.

2 COMMENTS

  1. […] As announced in May, Brussels Airlines needs to take substantial measures in order to create a long-term future for the company. The carrier needs to structurally reduce its costs to a competitive level. Today, the Management and the Worker’s Council of Brussels Airlines came to an agreement that allows tackling the company’s immediate and future needs. […]

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