Lufthansa profit weighed by slowing US growth
Lufthansa on Friday posted first-quarter results that fell badly short of expectations. The company failed to dispel continued worries about slowing economic growth and an ongoing pay dispute with pilots and flight engineers.
The German airline’s first-quarter operating profit came in at E5m, down from E99m a year earlier, and sharply below analysts’ expectations of about E90m, although sales for the quarter increased year-on-year.
Lufthansa blamed the profit fall on rising fuel costs and the cost of expanding its internet business initiatives. The rise in fuel prices, caused partly by the high US dollar exchange rate, made a E121m dent in earnings, it said.
The economic slowdown in the US and its impact on Germany and Europe, as well as the continued pay dispute, remain “risk factors,” the airline said. Subject to reaching an acceptable agreement with the pilots, the airline is maintaining what it called its “ambitious” target of posting an operating profit on par with last year.
The airline posted a 44.1 per cent increase operating profit to E1.04bn in 2000.
“The results are disappointing overall,” said one aviation analyst, “and the fact that their fuel hedging is not as strong as they like to say it is, is a bit of a worry.”
However, the first quarter tends not to be a strong one for the company and so does not necessarily give a good reflection of the year. “They are usually cautious at this point in the year, and with the wage negotiations hanging over them, you would expect them to talk themselves down,” commented the analyst.
Jurgen Weber, CEO, warned that the pay demands “would be tantamount to turning back the clock to undoing everything we have achieved so far.” The Vereinigung Cockpit union, which represents about 4,200 pilots, earlier this year put forward demands for increases in total remuneration packages of between 38 per cent and 70 per cent, and at the end of March staged a warning strike in support of its demands.
The results of a ballot on whether to escalate strike action are expected next Thursday.
Shares in Lufthansa were off their earlier lows, down 2.74 per cent at E20.58 in late afternoon trading.
