Lufthansa's Austrian Airlines, BMI Brands Log First Post-Purchase Profits

Deutsche Lufthansa AG’s Austrian Airlines and British Midland units posted a quarterly profit for the first time since their purchase last year after the German carrier slashed jobs and imposed new strategic plans.

Operating income in the three months ended Sept. 30 reached 23 million euros ($32 million) at Austrian Airlines and 3 million euros at British Midland. Total earnings at Cologne- based Lufthansa on that basis tripled to 783 million euros.

Lufthansa has cut almost 1,300 jobs at Austrian, reducing the workforce to just over 7,000, and said today that the unit is on target for a full-year operating profit next year. The German company has also slashed 800 of 4,500 positions at British Midland, the No. 2 carrier at London’s Heathrow airport, and predicts the division will achieve an annual profit in 2012.

“After a bumpy start to the year, we accomplished a remarkable comeback and have now reached cruising altitude far more quickly than could have been expected,” Lufthansa Chief Executive Officer Wolfgang Mayrhuber said in an earnings presentation. “The recovery of the market has helped us to record positive results in all of the business segments.”

Lufthansa gained 0.8 percent at 15.56 euros at the 5:30 p.m. close of trading in Frankfurt, taking the stock’s gain to 32 percent this year and valuing Europe’s second-biggest airline at 7.1 billion euros.

Cabin Investment

Mayrhuber said that Lufthansa, which also owns Swiss International Airlines and a stake in Brussels Airlines, must complete the revamp of existing assets before further purchases and is not close to any investment in Polskie Linie Lotnicze LOT SA, in which Poland plans to sell a minority stake next year.

At British Midland, or BMI, Lufthansa said it will introduce new processes and more efficient routines to lift productivity and also invest in the unit’s planes to improve cabin equipment as it seeks to lift ticket prices in the U.K.

At Austrian, the restructuring is continuing, Lufthansa said, with a new route strategy introduced with the winter timetable and market share already increasing in Vienna.

Lufthansa is also cutting costs by 1 billion euros through 2011 at the main airline unit, which it said should post a “substantively positive” operating profit this year after losing 203 million euros in the first half.

Earnings are being boosted by higher demand for inter- continental travel, which helped lift ticket prices, and by an increase in cargo traffic. Lufthansa said yesterday it expects annual group-wide operating profit to exceed 800 million euros.

JetBlue, Sky Chefs

Net income was 628 million euros across the group in the third quarter, up from 209 million euros a year earlier, Lufthansa said in a statement, adding that said it plans to resume dividend payments this year.

Earnings will continue to develop “positively,” with any slowing of global economic growth due to the base effect of tougher year-earlier figures, Chief Financial Officer Stephan Gemkow said in an interview.

Lufthansa plans to retain its holding in New York-based JetBlue Airways Corp., Gemkow said. British Airways Plc CEO Willie Walsh said last month that the unit might be a bid target after Continental Airlines was bought United Airlines, a Lufthansa ally, adding a hub in nearby Newark.

Among the fastest-growing businesses in coming months will be the Lufthansa Technik maintenance and engineering unit and the LSG Sky Chefs in-flight catering division, Gemkow said. The company will consider its options for the latter as it grows, “to see whether we are the right parent,” the executive said.

Gategroup Holding AG, the biggest global rival to Sky Chefs, said this month that it will use proceeds from a capital increase to fund purchases and is interested in acquiring the food units of carriers including Japan Airlines Corp.

Lufthansa will reach a decision next year on whether to order Boeing Co.’s 787 Dreamliner plane or the rival A350 from Airbus SAS, Mayrhuber said. Gemkow added that the company hasn’t yet decided how much capacity it needs to add of whether there’s a possibility of an order for both models.

To contact the reporter on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong in Berlin at kwong11@bloomberg.net

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