Lufthansa braces for difficult second half of year

Lufthansa braces for difficult second half of year

The airline industry has been warned by the boss of Lufthansa that it needs to prepared for a 'difficult' second half of the year.

Chief executive Carsten Spohr made the comment as the German airline group confirmed that annual profits will be below last year’s level of €1.8 billion, with “very weak trends” in its passenger business during the third quarter.

Spohr said: “The terrorist attacks in Europe and also the increasing political and economic uncertainties are having a tangible impact on passenger volumes.

“The forward bookings, in particular for our long haul services to Europe have declined significantly. We expect the high pricing pressure to continue.”

He reiterated an earlier projection that adjusted earnings would be down on 2015 levels.

“With our network airlines we have now laid important foundations to sustainably enhance both our revenue quality and our cost structures, from continued fleet renewal to product enhancements like internet connectivity on short-haul services and the conclusion of the new collective labour agreement with the UFO union,” Spohr said.

He added that German budget subsidiary Eurowings “already has competitive unit costs on comparable routes”.

“We aim to significantly reduce these further by 2020,” Spohr added. “And at our service companies we have introduced growth projects and efficiency programmes that will raise our performance and permit sustainable and profitable growth.”

The group’s total first half revenue fell by 2.1% to €15 billion year-on-year although adjusted earnings rose by €61 million to €529 million as a result of lower fuel prices and cost cuts.

Routes to Europe from South America and Asia showed a “particularly weak” performance in the six months to the end of June.

“European and North American business developed relatively stable; Europe even saw an increase in its yields excluding currency effects in the second quarter,” Lufthansa said.

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