Lufthansa plans to scrap dividend in favour of €9bn fleet expansion

Lufthansa plans to suspend its dividend for the first time since 2010 to preserve cash as the German airline rejuvenates the fleet and pushes ahead with its most ambitious cost-savings programme to date.

Lufthansa will buy eight long-range and 100 short-to medium-range aircraft in a purchase valued at about €9 billion, the carrier said. Lufthansa also plans to close sites, including its headquarters in Cologne, and merge administrative functions as part of a savings program targeted at increasing operating profit to €2.3bn by 2015.

"In order to successfully meet the changes in the aviation industry, we need to perform even better," Lufthansa chief executive Christoph Franz said in the statement. "Only then can we create the necessary scope for the measures we need to take to shape the future of the Lufthansa Group ourselves."

Europe's second-biggest airline began reorganising almost a year ago to improve margins, eliminating 3,500 administrative jobs and expanding its Germanwings low-cost brand. That was a strategy also pursued by International Consolidated Airlines Group and Air France-KLM as the legacy carriers feel the squeeze from low-cost rivals and the ascent of Middle East carriers expanding their global networks.

Net income last year was €990 million, compared with a year-earlier loss of €13m, mainly because of gains from disposals, Lufthansa said in its preliminary report of earnings. Revenue rose 4.9 per cent to €30.1bn. Lufthansa is scheduled to report complete earnings on March 14.

* Bloomberg News

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