Lufthansa Lifts Profit Forecast as Business Bookings Improveby
Airline says profit will now be similar to previous year
Lower fuel cost, more business traffic have helped earnings
Deutsche Lufthansa AG raised its 2016 profit forecast as short-term bookings of business travelers performed better than expected in September and lower fuel costs are due to give a boost late this year.
Adjusted earnings before interest and taxes this year will be similar to 2015, the German airline said in a statement Wednesday, bolstered by a projected decrease of 140 million euros ($154 million) in fourth-quarter fuel expenses. The carrier had said in July that the profit measure would be below last year’s level as terror attacks and political uncertainty weighed on reservations.
Forecasting last-minute bookings “remains challenging” and may lead to earnings volatility, Lufthansa said. The geopolitical uncertainties are still weighing on sales, particularly on long-haul flights to the continent, it said.
Europe’s carriers have been battling a drop-off in demand as the refugee crisis and a string of attacks weigh on passenger confidence, especially on lucrative routes from the U.S. and China. The decline in long-term bookings prompted Lufthansa to review its capacity, measures which the airline said Wednesday have been successful.
Lufthansa’s American depositary receipts rose as much as 5.4 percent, their biggest intraday gain in two months. The ADRs climbed 5.1 percent to $11.91 at 3:03 p.m. in New York.
Revenue is expected to decline by 7 percent to 8 percent this quarter, a percentage point worse than previously forecast, the airline said, as crude’s collapse continues to exacerbate a glut in seats available that has been driving down ticket prices.
The U.K.’s vote to exit the European Union has cast doubts over the continent’s economies, prompting airlines including EasyJet Plc and British Airways owner IAG SA to cut profit guidance. Europe’s biggest discounter, Ryanair Holdings Plc, said Tuesday its earnings would be lower than it forecast amid the decline in ticket prices.
Lufthansa last month moved to buy Brussels Air, which has 49 jets, and take over 35 aircraft from the ailing Air Berlin Plc to boost its low-cost Eurowings operation. The discount unit is key to Chief Executive Officer Carsten Spohr’s efforts to reduce the legacy carrier’s cost-base and enable it to stem losses of passengers to Ryanair and EasyJet.
Preliminary figures for the first nine months of 2016 shows total sales declined to 23.9 billion euros from 24.3 billion euros a year earlier, Lufthansa said. Adjusted earnings before interest and tax in the period fell by 16 million euros to 1.68 billion euros. Unit costs excluding fuel were down 2.1 percent.
Detailed results for the period are due to be published on Nov. 2.