GERMANY: Fuel Costs Affect Lufthansa Profits

German airline Lufthansa on Tuesday posted a decline in second-quarter earnings, hurt by price competition on short-haul routes in Germany and Austria as well as rising fuel costs.

Europe’s biggest airline group said adjusted earnings before interest and tax fell to €754 million, compared to €1 billion a year earlier.

Fuel costs were €255m higher than in the previous year, it said.

Lufthansa said it expected the European market to remain challenging until at least the end of this year.

The company maintained its guidance for 2019 for an adjusted ebit margin of 5.5 per cent to 6.5 per cent for the year, down from a previous target of between 6.5 per cent and 8 per cent.

Lufthansa in June cut its full-year profit forecast due to lower prices and higher fuel costs compounding losses at its budget subsidiary Eurowings.

Lufthansa is locked in a bruising fight for market share as a glut of seats hurts prices on short haul flights out of Germany and Austria.

As flagged in the June, yields at the low-cost Eurowings tumbled, with long-haul routes offering the only bright spot.

Headwinds from a German economic slowdown are also building amid simmering trade tensions. As well as hitting corporate demand for flights, the conflict is crimping earnings at Lufthansa’s cargo unit, with quarterly earnings dropping 88 per cent.

The company does not see the scenario improving this year, cautioning that discounting will continue to weigh on ticket prices. The airline said margin targets at its cargo unit are at risk if demand does not stabilise.


Tourism Observer