Higher fuel and overcapacity prompts Lufthansa loss

April 16, 2019
Lufthansa loss

European giant Lufthansa Group has reported a first-quarter loss due to higher fuel costs and “substantial industry-wide capacity growth” in Europe.

The loss was bigger than analysts expected but the airline said it expected a decline in unit revenues  to turn around in the second quarter

The increased competition led to lower unit revenues while the results also took a 202m euro hit from higher fuel costs.

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The airline reported a loss of 336 million euros in adjusted earnings before interest and tax, despite a 3 percent rise in overall revenue to 7.9 billion euros.

“Market-wide overcapacities in Europe also put downward pressure on fares,’’ it said.

“The negative trend was accentuated by the fact that first-quarter results for 2018 had been particularly strong, owing to the capacity reductions deriving from Air Berlin’s demise.”

The network airlines lost 160 million euros in the first quarter, compared to a positive adjusted EBIT of 128m euros in the same quarter a year ago, while Eurowings saw its EBIT loss expand from 212m euros to 257m euros.

Earnings at Lufthansa cargo fell by 67 percent due to downward trends in the air freight market, particularly on routes between Europe and Asia, but earnings were up at Lufthansa Technik and LSG.

“We are seeing good booking levels for the quarter ahead,” Deutsche Lufthansa chief financial officer  Ulrik Svensson said.

“At the same time, we have substantially reduced our own capacity growth. And with a reduction in growth also projected for the European market as a whole, we expect unit revenues to increase again in the second quarter.

“This should be further buoyed by the still-strong demand on our long-haul routes, especially to Asia and North America.”

Overcapacity in Europe has led to the demise of a number of airlines and earlier this month prompted a profit warning from easyJet, which said it expected to report a 275 million pound loss for the half year to March 31.