Lufthansa Expects a Profit Slump

The race for the cheapest airfares will now also be a problem for Lufthansa. The management has massively reduced the previously targeted profit targets. Also in the freight business it is worse than expected. Investors react relentlessly.

Due to the “aggressive” business expansion of low-cost airlines and the resulting drop in ticket prices, operating earnings (adjusted EBIT) should reach only 2.0 to 2.4 billion euros this year, Europe’s largest airline announced late Sunday evening in Frankfurt. So far, the management had assumed about 2.4 to 3.0 billion euros.

In its record year of 2017, Lufthansa had earned around EUR 3.0 billion in operations, and a year later it was still well over EUR 2.8 billion. The analysts interviewed by the news agency Bloomberg had at least about 2.7 billion for 2019 after all on the slip.

The cargo business is also worse off than expected: The freight division Lufthansa Cargo has already taken three older cargo aircraft out of the flight schedule and expects only stagnating sales this year. Of the revenues, only about three to five percent of the Group’s operating result is likely to hang. That’s about half as much as previously intended.

The low-budget subsidiary Eurowings should now miss the break even point due to the tough competition and operationally write red numbers, announced the Dax Group with a view to 2019. Because competitors are willing to accept significant losses in order to expand their market share. This is also on Eurowings not without a trace. The Group’s low-cost subsidiary competes on many routes with providers such as Ryanair and Easyjet.

The Lufthansa management expects the European market to remain so challenging at least until the end of 2019. After Spohr stopped the expansion of its flight schedule at Eurowings for 2019 a few weeks ago, it is now aiming for lower growth for network airlines. As a result, sales in 2019 should only increase in the low single-digit percentage range. So far, the management had an increase of 4 to 6 percent in the eye.

20 years ago, an aircraft of the Irish airline Ryanair landed for the first time on the former military airfield Frankfurt-Hahn. It was the beginning of a new era – not only in German aviation. Now Ryanair wants to ignite another stage and become an “Amazon of the travel industry”.

The falling ticket prices are also responsible for the decline. In the current second quarter, average yields are likely to fall “significantly”, especially at Eurowings, it said. For the full year, Group management expects a decline in the mid-single-digit percentage range, while the group’s own network airlines Lufthansa, Swiss and Austrian forecast a slight decline in currency-adjusted terms.