News Column

Lufthansa stock in tailspin after profit warning

June 12, 2014


GERMAN airline Lufthansa clipped the wings of aviation stocks yesterday by issuing a profit warning, blaming pressure on fares in Europe and the US.

The firm, Europe's biggest airline by passenger numbers, said it expected to make an operating profit of 1bn (805m) this year, down from its previous forecast of between 1.3bn and 1.5bn.

A target of 2.65bn of earnings in 2015 has also been scrapped, despite the firm's ongoing cost-cutting drive. The board said it has proposed a lower target of 2bn to new chief executive Carsten Spohr, who took charge in May.

Lufthansa's finance boss Simone Menne said yesterday that the firm would review its spending plans and "noticeably reduce" its flights this winter to try to counteract the excess capacity that is dampening prices.

The company singled out the fastgrowing Gulf carriers as a "major concern" for airlines in Europe. Strike action by pilots and the devaluation of the Venezuelan bolivar had also hurt performance, Lufthansa said.

Shares in Lufthansa tumbled 14 per cent yesterday, dragging other stocks lower, including EasyJet, which fell four per cent, and IAG, which declined three per cent.

Cantor Fitzgerald transport analyst Robin Byde cut his profit forecast for Lufthansa by 30 per cent to reflect the warning but kept a buy rating, saying "its fundamentals remain sound and cost cutting should now accelerate".

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Source: City A.M. (UK)

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