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Lufthansa has struggled to turn around its core airline

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Smaller subsidiaries like Eurowings, Discover are helping boost growth

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CEO promises 2025 will see improvements

By Ilona Wissenbach and Joanna Plucinska

FRANKFURT, Sept 10 (Reuters) - Lufthansa group is making progress with its turnaround plan, though 2025 and 2026 will be transitional years as it works to stem spiralling costs, Chief Executive Carsten Spohr told reporters in Frankfurt.

The airline group issued two profit warnings in 2024 as its core airline struggled with spiralling costs and labour disruptions while its more successful Eurowings continues to grow.

"One thing is clear: the resulting performance has not been good in recent years. That's why it was absolutely clear to us that this year would remain another year of transition ... But it is a year of transformation toward higher performance," Spohr said.

"I believe I can also say that this turning point in 2025 has been achieved." Flight operations are more stable, with only one percent of flight cancellations, and customer satisfaction has increased as a result, he said late on Tuesday.

Last year Spohr promised to turn around the flag carrier by 2026 and launched a broad restructuring of the group in an effort to get costs under control.

Spohr said Lufthansa will seek to integrate more closely with other group members, including Swiss, Austrian and Brussels Airlines to help streamline operations.

Cheaper operations at its newer subsidiaries City Airlines and Discover are helping the group grow, he said.

"The cost disadvantage of the classic division, the core of the core, is so great that the group's growth is currently taking place elsewhere. We would like to be able to reduce these costs," Spohr said.

Lufthansa's pilot union is threatening to strike as it calls for adjustments to the airline's pension scheme.

Upcoming deliveries of new Airbus and Boeing aircraft are also set to help bolster growth, with 60 jets expected by the end of 2026. The first Boeing 787 Dreamliner jet with Lufthansa's luxury Allegris cabin was delivered this month.

Airlines have lamented how expensive it is to operate in Germany for years, with Ryanair announcing earlier this year that it would pull some of its operations due to high airport charges.

Spohr said the group will have over 50% of its fleet based outside of its core German hubs in Frankfurt and Munich as it continues its takeover of Italian carrier ITA Airways and expands its multi-hub model in places like Vienna and Brussels.

That could help the group better balance costs as it continues to look to less expensive markets to grow.