Rising fuel costs and seating surplus push Lufthansa into loss

Photo Reuters

Lufthansa reported an operating loss of 336 million euros (£290.4 million) for the first three months of the year, hurt by rising fuel costs and excess capacity in Europe, sending its shares down on Tuesday. Germany’s biggest airline said in an after-hours update on Monday that a 202 million euro rise in fuel costs had contributed to the loss, while ticket prices fell significantly at Lufthansa’s other airlines, which include SWISS and Austrian Airlines, as well as budget carrier Eurowings.

The size of the loss was far greater than analysts had expected. Lufthansa’s stock was down 1 percent at 0925 GMT, underperforming Germany’s bluechip index by around 2 percent and dragging down shares of rivals Ryanair, EasyJet and Air France KLM. Lufthansa’s loss added weight to concerns across the industry and follows a bleak report from easyJet, which said on April 1 it expected to report a 275 million pound ($360 million) loss in the six months to the end of March.

The fall in Lufthansa’s earnings was accentuated by a tough comparison with the previous year when the insolvency of Air Berlin removed a major competitor in its home market, it said. Lufthansa reported an operating profit of 52 million euros for the same period a year earlier. European airlines are battling overcapacity and high fuel costs, while uncertainty around Brexit has led some travellers to delay booking flights for their summer holidays.

Iceland’s WOW air became the latest budget airline casualty in March, halting operations and cancelling all future flights after failing to raise more funds. Other recent failures include Britain’s Flybmi, German holiday airline Germania, Nordic budget airline Primera Air and Cypriot carrier Cobalt. The first quarter is traditionally the weakest for airlines, analysts at Independent Research said, but added that the risk of a profit warning had risen.

Lufthansa said it expects revenues to pick up in the second quarter as booking levels recover, adding that for 2019, it still expects to make an adjusted operating profit margin of 6.5-8.0 percent. Lufthansa is due to publish detailed results for the first quarter on April 30.

Source: Reuters