Brussels Airlines To Trigger Major Downsizing

 - May 12, 2020, 11:44 AM
Brussels Airlines plans to shrink the size of its Airbus A330 fleet from 10 to eight. (Photo: Brussels Airlines)

This story is part of AIN's continuing coverage of the impact of the coronavirus on aviation.

Brussels Airlines plans to cut its workforce and network by about one quarter by the end of the year and reduce its fleet by 30 percent, from 54 to 38 aircraft, as part of a turnaround plan. The airline’s CEO, Dieter Vranckx, said it “urgently” needs to survive the current crisis and to become structurally competitive in the future.

Speaking to media after informing union representatives about the downsizing, Vranckx acknowledged the airline already needed to restructure before Covid-19, prompting a move at the end of last year to launch its “Reboot” turnaround program that targets an EBIT margin of 8 percent by 2022. But due to the pandemic “we have our back to the wall now,” he said. “We will not survive in the current structure.” Consequently, the company will deepen and bring forward the execution of Reboot by two years.

Brussels Airlines suspended scheduled flight operations on March 21, and its fleet has remained grounded since then. The airline hasn’t decided yet which aircraft will leave the fleet early; much will depend on discussions with lessors on the conditions for the premature return of aircraft and termination of contracts without penalties. The company's widebody fleet—all Airbus 330s—will shrink from 10 to eight units and most likely the two -300 variants powered by Rolls-Royce Trent 700 engines will leave early.

The restructuring accounts for only one element of Brussels Airlines’ survival strategy. The support of shareholder Lufthansa Group for the restructuring cost and a €290 million bailout from the Belgian government to alleviate the company’s liquidity crunch stand as the other two pillars. “All three elements are indispensable and are interconnected. They work in parallel and will secure the existence of Brussels Airlines and its growth when demand returns,” Vranckx told AIN. He declined to comment on the progress of the talks with the Belgian authorities, noting only that without financial support the company will run out of cash by the end of the month.

Negotiations have so far proved difficult. The Belgian government wants guarantees from Lufthansa that proceeds would not flow to the German group’s flagship carrier and a commitment that Brussels Airlines and Brussels Airport remain essential parts of the group's multi-brand and multi-hub network strategy. Reportedly, the Belgian government would also seek a stake in the group, a condition Lufthansa CEO Carsten Spohr wants to avoid.