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UPDATE: Lufthansa cuts profits forecast on overcapacity, pilots strike

June 11, 2014

Frankfurt (Alliance News) - German airline Lufthansa on Wednesday reduced its forecast for operating profits this year and next because of unfilled seats on European and US flights and a pilots strike earlier this year.

It lowered its 2014 operating profit forecast to 1 billion euros (1,36 billion dollars) from an earlier estimate of between 1.3 billion and 1.5 billion euros. Its 2015 forecast was pulled back to 2 billion euros from 2.65 billion euros.

The primary reason for the lowered expectations was the problem of a shortage of passengers and cargo coupled with an overabundance of seats and space on its planes in its European and US business. That has led to a drop in prices on those routes, the airline said.

Expansions by Gulf carriers, particularly in Europe, also are producing worries at Lufthansa, chief financial officer Simone Menne said. The Gulf carriers are increasing their capacity and making investments in European airlines.

A pilots strike in early April reduced Lufthansa results by 60 million euros. Bookings have only recently recovered to normal levels, the airline said.

Lufthansa lost another 60 million euros so far this year because of currency controls in Venezuela that prevents sales in the local bolivar from being repatriated.

Lufthansa suspended ticket sales in Venezuela for a short time in May because of the controls, joining other airlines that have reduced routes, sales and capacity to the South American country.

Lufthansa's warnings about threats to its revenues when it presented its quarterly earnings at the beginning of May "have unfortunately materialized," Menne said.

In response, the airline will reduce its capacity in winter and step up a cost-cutting plan, which would allow it to double its operating profits in 2015, she said.

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Source: Alliance News

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