Follow @AirwiseNews

Lufthansa Sees Profit Limited By Revamp Costs

Bookmark and Share

Lufthansa said a tough economic outlook and restructuring costs would limit operating profit growth this year and next.

European carriers including Lufthansa, Air France-KLM and British Airways are cutting jobs and shelving growth plans as they grapple with high jet fuel prices, a weak economy and fierce competition from low-cost airlines and Middle East carriers.

Lufthansa is cutting 3,500 jobs, revamping low-cost carrier Germanwings and bundling procurement for its airlines. It hopes its restructuring program - dubbed SCORE - will help boost operating profit to EUR€2.3 billion (USD$3 billion) in 2015, compared with EUR€524 million last year.

"We should not get our expectations too high for 2013," chief executive Christoph Franz said on Thursday as he presented full 2012 financial results. "Our 2013 result shall have to bear the burden of the restructuring and project costs."

Excluding restructuring costs of EUR€160 million, the revamp program's hundreds of projects contributed EUR€618 million to earnings in 2012. That figure will rise to EUR€740 million this year, Lufthansa said.

RISING FUEL BILL

Lufthansa reported last month its 2012 operating profit dropped 36 percent as the price of jet fuel rose and it spent money on its restructuring program.

Fuel accounts for more than a fifth of Lufthansa's operating costs, and its fuel bill rose almost 18 percent to EUR€7.4 billion in 2012 from EUR€6.3 billion a year earlier.

Lufthansa was the only major European legacy airline to post a net profit for 2012, helped by a EUR€623 million gain from the sale of shares in Amadeus IT Holding.

Nonetheless, it scrapped its dividend for 2012, choosing instead to bolster its fleet and fund future restructuring, despite net profit that beat the most optimistic analyst forecasts.

Lufthansa said its supervisory board approved the purchase of 108 new aircraft on Wednesday. The aircraft with a total list price of EUR€9 billion include two Airbus A380s for Lufthansa and six Boeing 777-300s for SWISS.

Lufthansa said it saw net profit declining this year from 2012's EUR€990 million but did not provide a specific target. Analysts see net profit of EUR€545 million this year.

(Reuters)

Airwise adspace