UPDATE 1-Air Berlin steps up cost-cutting drive

Thu Oct 18, 2012 2:38am EDT

Related Topics

* Air Berlin announces new cost-cutting programme

* Cites worsening economic environment, weak euro

* Says aims to significantly reduce costs

* Shares indicated 0.6 percent lower (Adds further details, background)

FRANKFURT, Oct 18 (Reuters) - Air Berlin, the German airline partly owned by Gulf carrier Etihad, is launching another cost-cutting programme as it struggles to return to profit.

"The company is reacting to a further worsening of the economic environment, the weak euro and consumer behaviour that is marked by growing uncertainty," the company said in a statement, confirming an earlier report.

Germany's second-biggest airline after Lufthansa a lso said a German air travel tax and persistently high fuel prices created additional headwinds.

It said it aimed to significantly reduce costs with the new programme, dubbed Turbine 2013, without being more specific. It also did not say whether the programme would involve job cuts.

Air Berlin, which has not posted a full-year operating profit since 2007, has already cut seats, unprofitable routes and postponed plane orders to reduce costs and shrink its way back to profitability after racking up debts to expand.

Its current savings programme, Shape & Size, is aimed at improving earnings before interest and tax (EBIT) by 230 million euros by the end of 2012.

German daily Frankfurter Allgemeine Zeitung earlier cited a letter sent to employees by Chief Executive Hartmut Mehdorn as saying Shape & Size would not be sufficient to reach the airline's goal of returning to an operating profit next year.

Shares in Air Berlin were seen opening 0.6 percent lower, according to pre-market data. (Reporting by Maria Sheahan, Editing by Jonathan Gould)

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