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Lufthansa second-quarter earnings fall on rising fuel costs and price wars

30 July 2019 10:46 (UTC +04:00)

German airline Lufthansa (LHAG.DE) on Tuesday 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, APA reports citing Reuters.

The company said in a statement that adjusted earnings before interest and tax (EBIT) fell to 754 million euros ($839.73 million), compared to 1 billion euros 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 15% 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 (EZJ.L) and Wizz Air (WIZZ.L) - saw its unit revenues decline by 5% 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 21% 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.