Lufthansa First Quarter Loss Narrows

May 3, 2016

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Pressure on ticket prices, tourist caution after attacks on European cities and cargo weakness prompted Lufthansa to cut growth plans for the year.

The group reported a first-quarter operating loss of EUR€53 million, narrowing from EUR€167 million in the same period last year, mainly due to low fuel and cost reductions.

Total revenue for the quarter was EUR€6.916 billion, down 0.8 percent from EUR€6.973 billion last year.

The company expects 2016 earnings before interest and tax to improve slightly on last year's EUR€1.8 billion.

The German airline will increase overall flight capacity by 6 percent this year instead of 6.6 percent, with chief financial officer Simone Menne adding that it is evaluating whether more reductions are needed.

British Airways owner IAG last week said it will offer fewer flights than initially planned this summer because people are flying less after the Brussels attacks.

Lufthansa's Menne said economic weakness in South America has contributed to pricing pressure that has been compounded by reduced demand from China and Japan as well as tour groups from North America after the attacks on Paris and Brussels.

"The trends are more pronounced than we had expected a few weeks ago," she said.

Menne said that sector-wide capacity cuts are unlikely to be deep enough to compensate for the falling passenger yields but expects a pick-up in bookings as the summer travel season draws closer.

The group cut its forecast for the cargo business and is reviewing operations that have been hit by overcapacity because of the availability of additional cargo space on passenger aircraft worldwide.

CFO Menne said the group had reached a turning point on unit costs that shrank by 4 percent in the quarter, excluding fuel and currency. Lufthansa has been trying to reduce costs to compete more effectively with budget carriers in Europe as well as Middle East long-haul rivals.

(Reuters)