Deutsche Lufthansa AG, the largest German airline, has reportedly adjusted its dividend policy and recently announced a revamp of its low-cost Eurowings unit, in hopes of soothing worried investors only a week after it issued a second profit warning for this year.
Citing reliable sources, Lufthansa is expected to rebase the dividend to 20% to 40% of the adjusted net income, which would provide flexibility for attractive payments. In 2018, it awarded 80 cents per share due to its distribution of 10% to 25% earnings before tax and interest.
Apparently, Lufthansa said that it will simplify the Eurowings operation and focus on short-haul flights that are from its hubs in Munich and Frankfurt. The Eurowings fleet is said to be standardized around Airbus SE’s A320 jet and operations and it will be moved to a single German operating license, making it efficient and saving 15% of unit cost by the year 2022.
Carsten Spohr, Chief Executive Officer at Lufthansa said that the company has presented concrete actions which will help generate value for the shareholders and enhance the airline’s efficiency. The company wants to be the shareholder’s first choice, Sphor added.
Reportedly, Eurowings is struggling to compete with Ryanair Holdings Plc. and other discount specialists and Lufthansa wants to calm investors in the middle of a European fare war, after it cut profit expectations of 2019 in the previous week. The group faces a possible strike during summer travel season are cabin crew unions will be voting on industrial action.
According to reliable sources, Lufthansa’s shares traded 1.1% lower at 14.65 euros in Frankfurt which extended their decline to around 26% this year. Following the profit warning, the stock reportedly suffered the biggest drop in three years. The Eurowings’ turnaround is aimed at delivering a profit by the year 2021 and transfer its long haul flights to the network airlines operations of the company.
Source Credit- https://skift.com/2019/06/24/lufthansa-plans-revamp-of-low-cost-eurowings-unit/