Lufthansa to cut 3,500 jobs in draconian cost-saving

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Germany's top airline, Lufthansa, announced plans to shed 3,500 administrative jobs as part of a radical cost-cutting programme amid soaring jet fuel prices and stiff competition.

The unprecedented cuts, which will take place worldwide over the next few years, aim to reduce administrative costs by a quarter, the airline said.

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

The German giant is undergoing an overhaul in the wake of fierce competition from budget airlines and said in February it aims to save 1.5 billion euros ($2.0 billion) by 2014.

Cuts in staff costs overall would amount to about one third of those overall savings, the company said.

Some 2,500 of the job cuts will be administrative posts in Germany, Franz said in a conference call.

The company said it would try to find the cuts "preferably by means of socially responsible measures" but Franz noted that compulsory redundancies and site closures could not be ruled out.

On Wednesday, the airline said that it suffered a net loss in the first quarter of 2012 as the soaring price of jet fuel more than offset a rise in passenger numbers.

The company posted a net loss of 397 million euros in the first three months of the year, more than the 336 million euros expected by analysts, with the operating loss at 381 million euros, about twice as much as in 2011.

Despite the setback, the airline confirmed its 2012 forecast for stronger sales and an operating profit of around 500 million euros.

Shares in Lufthansa saw modest gains after the announcement but by 1430 GMT, they were down about 1.72 percent with the DAX blue-chip index off 0.42 percent.

The group employs 16,800 people in its administrative departments around the world, 11,500 of them in Germany, financial director Stephan Gemkow said.

Lufthansa said it also planned to save 200 million euros from this year by regrouping its purchasing activities which currently are conducted separately by its different companies.

The group also includes Swiss and Austrian Airlines.

It foresees savings of up to 100 million euros from this year through greater cooperation between Lufthansa and its subsidiary, Germanwings, the airline said.

High jet fuel costs have hit Europe's airline sector across the board.

Scandinavian airline SAS also announced on Thursday that its first-quarter losses had nearly doubled and said it would step up a cost-cutting programme.