Lufthansa Reins In Profit Expectations

Lufthansa forecast only slightly higher profits for 2016 as it reported adjusted earnings for 2015 up 55 percent.

The forecast came despite lower fuel prices, with a warning of cut-price competition and falling average fares as the airline group ramps up its Eurowings budget business.

Lufthansa reported 2015 adjusted earnings before interest and tax of EUR€1.8 billion, up 55 percent from the previous year. Total revenue for the year was EUR€32.1 billion, up 6.8 percent from 2014.

Like rivals Air France-KLM and IAG, Lufthansa benefitted from low oil prices and strong travel demand in 2015, enabling it to restore dividend payments to shareholders.

However, low cost rivals such as Ryanair and easyJet have also benefitted and are challenging Lufthansa's new budget operation, Eurowings, adding more seats in Europe and especially Germany and putting pressure on ticket prices.

Lufthansa forecast a significant decline this year in yields due also to the expansion of Eurowings on long-haul routes. Chief Financial Officer Simone Menne told journalists she could not see yields in Europe improving any time soon.

Lufthansa said it expected a slight increase in profit for 2016 after reporting adjusted earnings before interest and tax of EUR€1.82 billion for 2015.

The group is still struggling to reach agreement with staff on new pay and pension deals, with last year seeing both pilot and cabin crew strikes, costing the carrier EUR€231 million in lost earnings in 2015.

Alongside a EUR€1 billion drop in its fuel bill for 2016, Lufthansa said it would lower costs, after unit costs, excluding fuel and currency effects, rose 2.4 percent in 2015.

Attacks on popular tourist destinations, from Paris to Tunisia and Turkey, also knocked confidence at the start of the year.

Menne said people were still flying, albeit booking tickets later.

"We see caution on forward bookings, but we aren't seeing fewer passengers. It's a change in booking trends," she said.