Lufthansa today announced a turnaround plan for Eurowings in which the budget carrier will focus on short-haul flights and seek a 15% cut in costs by 2022 in the hope of returning to profit.
The German airline cited falling revenues at Eurowings as a major reason for its warning on full-year profits on June 16.
Eurowings' revenue was also forecast to fall sharply in the second quarter.
Lufthansa said its Eurowings fleet would be standardised on the Airbus A320 family and it would seek to boost productivity at Eurowings by limiting itself in Germany to one air operator's certificate.
Brussels Airlines - the Belgian national flag carrier which Lufthansa took control of in 2016 - would not be integrated into Eurowings, Lufthansa said.
A turnaround plan for Brussels Airlines will be announced in the third quarter.
Lufthansa also said it would start pegging its dividend payout ratio to net profit in the future to give the group more flexibility.
It would pay out a regular dividend of 20-40% of net profit, adjusted for one-off gains and losses.
Lufthansa said Eurowings' long-haul business would be managed by Lufthansa in future.
Carsten Spohr, chief executive of Lufthansa, said today's announcements sent "a clear signal that this company cares about its shareholders and tries to create value for them".
Lufthansa said its Network Airlines - made up of Lufthansa, Swiss and Austrian Airlines - would aim to use innovations in sales and distribution to make a contribution to increasing unit revenues by 3% by 2022.
Network Airlines will aim to reduce unit costs continuously by 1 to 2% annually, the airline said.