At Lufthansa Capital Markets Day, the airline informed its investors and analysts of the upcoming changes at one of its subsidiaries, Eurowings. The low-cost carrier will undergo a reorganization of it's fleet and route network and is expected to turn its tide around.

On June 24, 2019, Lufthansa (LHAB) (LHA) held a Capital Markets Day and revealed its newest plans to investors and analysts.

Just a few days prior, on June 16, 2019, the German airline group slashed its profit projections for 2019. According to Lufthansa’s (LHAB) (LHA) own press release, the airline group is striving in the long-haul market, successfully increasing revenues in routes between Europe and North America or Asia.

However, Lufthansa (LHAB) (LHA) is facing a lot of pressure in Europe. Low-cost heavily influenced the price of a flight ticket on the continent.

And according to IATA’s state of European air travel report, Q1 profitability margins in 2019 have fallen by 3.4% to -5.2% compared to the same period in 2018 in Europe.

As a result, Lufthansa (LHAB) (LHA) is making significant changes in the airline group.

Specifically, Eurowings is getting an overhaul – route, fleet and business model changes are coming. Lufthansa (LHAB) (LHA) expects the airline to be profitable once again in 2021, something Eurowings has not seen since 2016.

But a snap decision to overhaul Eurowings follows a similar snap decision to change the way the airline operated in 2015.

First overhaul of Eurowings

Lufthansa (LHAB) (LHA) announced the new business model of Eurowings on March 4, 2015. The CEO of Lufthansa (LHAB) (LHA) , Karl Ulrich said that “we see strong demand for low-cost, long-haul travel in the coming years”.

Eurowings started operating long-haul flights at much cheaper prices for both passengers and Lufthansa (LHAB) (LHA) .

Already then Lufthansa (LHAB) (LHA) felt the pressure of Europe’s emerging low-cost carriers, as the group lost a lot of money prior to 2015. The airline group posted a net profit of €1.228 billion in 2012, 2013 the net profit was €313 million. In 2014 the number was even lower, as Lufthansa (LHAB) (LHA) ended the year with a net profit of only €55 million.