Lufthansa second-quarter earnings fall on rising fuel costs and price wars
German airline Lufthansa has posted a decline in second-quarter earnings, hurt by price competition on short-haul routes and rising fuel costs, adding the European market would likely remain challenging until at least the year’s end.
The company said in a statement that adjusted earnings before interest and tax (EBIT) fell to €754m, compared to €1bn a year earlier.
“Our earnings are feeling the effects of tough competition in Europe and sizeable overcapacities, especially on our short-haul routes out of Germany and Austria,” said Ulrik Svensson, Lufthansa’s chief financial officer.
He said Lufthansa was reacting by cutting costs further and boosting flexibility, adding it hoped a turnaround plan announced for Eurowings in June would make its low-cost carrier sustainably profitable.
Back then Lufthansa said Eurowings would aim to slash costs by 15pc over the next three years and focus on short-haul flights as part of a plan to return to profit by 2021. Lufthansa cited falling revenues at Eurowings as a major reason behind a profit warning last month.
Eurowings - which is facing tough price competition from Ryanair, EasyJet and Wizz Air - saw its unit revenues decline by 5pc on a currency-adjusted basis in the second quarter but Lufthansa said the drop had eased largely due to a pick up in the long-haul business.
Ryanair on Monday reported a 21pc drop in quarterly profit as price wars in some European markets drove ticket prices lower. But Wizz Air last week raised its full-year capacity growth outlook after a strong start to its financial year.
Lufthansa maintained its guidance for 2019, having in June cut its full-year profit forecast due to lower prices and higher fuel costs compounding the effect of losses at its budget subsidiary Eurowings.
Fuel costs were €255m higher in the second quarter than in the previous year, it said.
Newspaper Handelsblatt reported on Monday that Lufthansa is considering adopting a corporate holding structure to simplify its operations, improve profitability and regain the support of investors.