Lufthansa Falls as Morgan Stanley Cuts Rating: Frankfurt Mover

Deutsche Lufthansa AG fell to its lowest in eight months after Morgan Stanley cut the rating on Europe’s No. 2 airline amid weak sales in the second quarter.

Lufthansa dropped as much as 66 cents, or 4.6 percent, to 13.72 euros in Frankfurt, its lowest since Dec. 14, 2012. The stock, which traded at 13.75 euros at 10:22 a.m., has lost 3.4 percent this year, trailing the Bloomberg World Airlines Index of 31 members, which has gained 7.3 percent in the period.

A “more difficult operating environment has emerged,” Penny Butcher, a London-based analyst at Morgan Stanley, said in cutting the stock to “equal-weight” from “overweight.” The second quarter saw yields, a measure of fare prices, weakening, something which will persist this quarter, she said.

Lufthansa on Aug. 2 reported second-quarter operating profit rose to 438 million euros from 269 million euros a year earlier, when adjusted for restructuring costs and one-off items, with sales little changed at 7.89 billion euros. The airline is in the midst of a restructuring program, called Score, to raise operating profit to a record 2.3 billion euros by 2015.

“With continued uncertainty around Score savings timings, pilot resolutions and the nature and implementation timing of the project costs of the fleet, we can’t see a clear path to outperformance,” Butcher said.

Morgan Stanley raised its price target for International Consolidated Airlines Group SA, parent of British Airways, to 4.80 euros from 4.15 euros per share. IAG dropped as much as 2 percent to 301.9 pence in London, reducing this year’s gain to 64 percent.

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