Fast-growing Austrian wants new planes

by Andreas Spaeth
November 13, 2018
Austrian new planes
All photos: Austrian Airlines

Austrian Airlines is the smallest long-haul carrier and the fastest growing airline in the Lufthansa Group.

But it is not yet profitable enough to warrant new aircraft.

“We are the only airline within the Lufthansa Group without one single aircraft on order,” complains new Austrian Airlines CEO Alexis von Hoensbroech.

Austrian became the smallest long-haul carrier in the German-led airline group after it withdrew its former Australia services to Sydney and Melbourne (inherited from former Lauda Air in a merger) already in March 2007.

A decade on, it had a record year in 2017 and is profitable for six years, after Lufthansa took over in 2009.

But von Hoensbroech, who joined Austrian from Lufthansa in August, should know best why Austrian Airlines (AUA) isn’t getting new aircraft yet.

He was the one who oversaw the integration of Austrian into the group in his former job.

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Vienna, Austria’s capital and Austrian’s hub, is one of four Lufthansa Group hubs and its smallest.

It is also the one that has come under particularly fierce attack by low-cost carriers since the recent demise of Air Berlin, something that has resulted in lower yields and revenues for Austrian compared to the other group carriers.

“We have to achieve a status where we are considered worthy for investments within the group,” von Hoensbroech tells AirlineRatings.

“Currently we only earn a margin of 4 percent of EBIT (earnings before interest and taxes), that is about half what other airlines in the group are making, and this gap doesn’t make it easy to attract investment to AUA and we have to see how to bridge the gap.”

AUA’s 85-aircraft-strong long fleet is aging, with an average age of 16.5 years.

That is especially true for the long haul sector, where the airline flies six Boeing 767-300ERs (average age almost 23 years) and six Boeing 777-200ERs (average age almost 18 years).

There was already a streamlining of the fleet in recent years, with Fokker 70s, Fokker 100s, Dash 8-300s and Boeing 737s gone.

“But still five different types today aren’t the ideal solution,” concedes the CEO, “AUA needs a modernization push.”

Some new aircraft can be resourced from inside the group, such as the 17 Embraer 195s that are now operated by Austrian, formerly flying with Lufthansa City Line. These are AUA’s youngest aircraft now with an average age of just seven years.

“But in general we have rather too few than too many aircraft in the group,” acknowledges von Hoensbroech.

His most recent acquisition for long haul came from storage, a Boeing 777-200ER built in 2001 and formerly flying for Varig and Aeromexico.

“We have to give the Group management good arguments for a fleet renewal, new Boeing 777s were surely an option,” he adds.

Traditionally, AUA has relied on connecting Western Europe and the world via Vienna to Central and South-eastern Europe, a region where AUA still serves 35 destinations, more than any other carrier.

However, the hub model for intra-European flights is under strong pressure from low-cost carriers offering point-to-point services, bypassing traditional hubs.

“Transfer traffic is weakening, but we can’t just exit this segment as we need to feed our long-haul services with it,” von Hoensbroech observes.

The pressure under which the management stands is reflected in the volatile route network especially on long haul.

Here AUA serves a range of mostly tourist-oriented seasonal routes in the Indian Ocean and to Cape Town as its newest addition during European winter. But it also flies a number of year-round services to major hubs.

It recently relinquished Hong Kong, Havana and Colombo, while frequencies to Tokyo were increased.

“In general we want to focus more on North America,” says von Hoensbroech.

Here AUA serves Toronto, New York, Washington DC and Chicago as well as flying seasonally to Los Angeles.

Despite its aging fleet the passenger product, especially business class on long haul is top notch at AUA and considered to be the best within the Lufthansa Group as well as among the best industry-wide.

Austraian fast growing

With its in-house caterer, Do & Co, AUA offers a flying chef on board and the lavishly appointed antipasto trolley. This is as much a trademark of the Austrian carrier as its  “Viennese Coffee House above the clouds”, a specialty coffee menu offering ten signature coffees prepared freshly on board.