Lufthansa surprises with earnings jump in third quarter

By AFP Oct 31st, 2012 ( No Comment )

Frankfurt: German airline Lufthansa on Wednesday reported a sharp rise in earnings in the third quarter, but stayed cautious for the full year and promised to intensify cost-cutting measures.

Lufthansa said in a statement its bottom-line net profit soared by 30 percent to 642 million euros ($832 million) in the period from July to September.

Analysts had been expecting a drop of as much as 40 percent.

Underlying or operating profit rose by 6.2 percent to 648 million euros on a 6.2-percent increase in revenues to 8.312 billion euros in the three-month period.

Taking the nine months to September, net profit jumped 65 percent to 474 million euros, but operating profit was down 13 percent at 628 million euros, despite a 6.1-percent increase in revenues to 22.8 billion euros.

“Despite strong headwinds, we have managed to achieve a respectable profit,” said chief executive Christoph Franz.

Nevertheless, Lufthansa faced “unsettling times,” he said.

“Ever-growing low-cost airlines and carriers from the Middle East are challenging us in our core business segment. Both the ongoing crisis in the euro area and the persistently high oil price had a distinct effect on business performance,” he said.

In addition, “the persistently intense price pressure, the air traffic tax and the costs of EU emissions trading certificates also impacted on earnings. We don’t have the level of profitability we need,” Franz said.

On top of this, the first and third quarters had also been affected by strikes by the air traffic controllers’ union, the trade union ver.di and Lufthansa cabin crew.

With the economic environment and the market conditions set to remain challenging, Lufthansa was keeping cautious about its full-year outlook and vowed to intensify it cost-cutting measures, Franz said.

During the course of the year, Lufthansa has successfully sold BMI, its biggest loss-maker and restructured its Austrian Airlines unit.

And earlier this month, Lufthansa announced a freeze in spending, said it would bundle procurement, and combine its loss-making European short-haul unit with its low cost carrier Germanwings, among other measures.

Nevertheless, “more changes are necessary,” Franz warned.

While revenues were still expected to rise, Lufthansa’s passenger business “is not yet satisfied with the earnings level attained in the current financial year.”

From a current perspective, the operating profit for the financial year 2012 “is only expected to be modest. The precise figure will depend on external

factors, which remain volatile,” Franz said.