Lufthansa plans cost cuts at long-haul business

An aircraft of German air carrier Lufthansa stands in front of the newly built A-Plus terminal section at the Fraport airport during a guided media tour in Frankfurt September 28, 2012.

FRANKFURT (Reuters) - German flagship airline Deutsche Lufthansa said it needs to cut costs at its profitable long-haul business to cope with rising fuel prices and stiff competition from Gulf carriers.

Lufthansa said in an employee newsletter distributed on Monday that it aims to reduce unit costs at its long-haul business by 10 percent by 2015 and by 20 percent by 2025, compared with 2011.

"Lufthansa is booking increasingly large declines in income on long-haul routes, even on trunk routes such as Beijing of Shanghai," it said.

The new savings project, dubbed SPRINT, is part of a company wide plan to improve annual earnings by 1.5 billion euros by the end of 2014.

Lufthansa has already frozen investments, announced job cuts and is combining its loss-making European short-haul unit with its low-cost carrier Germanwings.

SPRINT will focus on lowering fuel expenses and re-negotiating pricey contracts with suppliers but will also examine possible measures related to infrastructure, crew, fleet planning, cabin layout and ground processes, Lufthansa said. (Reporting by Maria Sheahan; Editing by Louise Heavens)