Business World

Friday 19 January 2018

Lufthansa doubles profits but warns on fuel

GERMAN carrier Lufthansa said a sharp rise in fuel costs could hurt its profits, although economic recovery should boost the airline's revenues and operating profit this year and next.

Lufthansa warned of other risks to earnings, including the impact of a German air travel tax and wage talks with workers.

Lufthansa has rerouted its scheduled flights to Tokyo to other Japanese cities such as Osaka this week after the Japanese earthquake and tsunami. But CFO Stephan Gemkow said demand for flights to Japan was unchanged.

Lufthansa also said its planned joint venture with All Nippon Airways, which dominates domestic traffic in Japan, could also be delayed by the disaster.

"2011 will not be a walk in the park," chief executive Christoph Franz said in a statement yesterday, warning of the pain of soaring fuel costs and fierce competition on routes within Europe and from Europe to Asia and the Americas.

International oil prices hit a two-and-a-half-year high last month as violence in Libya disrupted the country's oil output, with US crude staying above $100 per barrel.

Industry body IATA said earlier this month it expected global airline net profits to halve this year as rising costs, especially oil prices, offset increased demand.

IATA has also warned that the crisis in Japan could cut demand this month for premium class plane tickets -- the most profitable for airlines.

Despite the uncertainties, Lufthansa raised the prospect of further dividend payouts after reinstating them for 2010.

"If the economy develops as forecast and the course of business is not undermined by a disproportionate increase in fuel prices or other unforseeable factors, it can be assumed from a current perspective that revenue and earnings will develop positively in 2012, too," it said.

Lufthansa had already announced a bigger-than-expected 2010 dividend on March 9.

The airline said it had swung to a 2010 net profit of €1.1bn, more than double the consensus of €485m. This was boosted by a €400m one-off tax effect.

Irish Independent

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