Lufthansa Has Full-year Loss as BMI Wipes Out Operating Profit

Deutsche Lufthansa Reports 2011 Net Loss of 13 Million Euros
Pallets of cargo sit alongside a Lufthansa Airbus A380-800 aircraft at the Deutsche Lufthansa cargo terminal at Frankfurt International Airport. Photographer: Hannelore Foerster/Bloomberg

Deutsche Lufthansa AG, Europe’s second-biggest airline, reported a full-year loss as the unprofitable U.K.-based BMI unit that the German company is in the process of selling weighed on earnings.

Lufthansa’s loss was 13 million euros ($17 million) versus year-earlier net income of 1.1 billion euros. Discontinued operations clipped earnings by 285 million euros, reflecting a loss at BMI and valuation effects linked to the disposal.

The Cologne-based carrier reported an operating profit of 820 million euros, down 18 percent, beating the 811 million-euro estimate of analysts surveyed by Bloomberg. It will pay investors a 25 cent a share dividend, according to a statement.

“This is intended to let shareholders participate in the successful operating performance in the reporting year in a way that is justifiable to the financial profile,” the company said.

Lufthansa, which boosted annual revenue 8.3 percent to 28.7 billion euros, closed unchanged at 10.03 euros in Frankfurt.

British Airways parent International Consolidated Airlines Group SA agreed in December to buy BMI’s main operations, based at London Heathrow airport, for 172.5 million pounds ($272 million). A second bidder has also emerged for U.K. carrier’s Bmibaby discount division, Lufthansa said March 5.

Lower Dividend

“BMI was a problem child and didn’t fit with Lufthansa’s strategy, so from that perspective it’s positive for them to get it out of their business, but even with these figures IAG has got a very good deal by acquiring the airline without pension issues,” said Stephen Furlong at Davy Stockbrokers in Dublin.

While Lufthansa said it was making an exception to its dividend rule to make an award after posting a net loss, the figure was less than consensus of about 50 cents, based on operating profit estimates, the analyst said. The sales number was also 500 million euros below forecasts, he said.

“That could imply that fourth-quarter revenues were a bit weak,” said Furlong, who rates the stock “neutral.”

Lufthansa is seeking to revive earnings via a savings plan aimed at boosting annual profit by 1.5 billion euros by 2014, the airline said Feb. 7. The cuts will come through increased integration of areas including cargo, engineering and catering, and are necessary to finance future fleet investment, it said.

The profit-improvement plan -- named SCORE, or Synergies, Costs, Organization, Revenues, Execution -- follows on from a package that saved 1 billion euros between 2008 and 2011. Cologne, Germany-based Lufthansa has already trimmed capacity growth for the current 12 months to 3 percent from a planned 9 percent after saying Sept. 20 that 2011 operating profit would fall short of the previous year’s 876 million euros.

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