Lufthansa warns on profits amid growing competition
By Michele Maatouk
Date: Monday 17 Jun 2019
(Sharecast News) - Lufthansa cut its 2019 outlook on Monday as it warned that market-wide overcapacities and "aggressively" growing low-cost competitors are putting pressure on yields in the European short-haul market.
The airline now expects its adjusted earnings before interest and tax margin to reach 5.5% to 6.5% versus a previous forecast of 6.5% to 8%, resulting in group adjusted EBIT of between €2bn and €2.4bn this year, down from €2.4bn to €3bn previously. The outlook factors in a fuel cost increase of €550m despite the recent decline of the oil price.
"Yields in the European short-haul market, in particular in the group's home markets Germany and Austria, are affected by sustained overcapacities caused by carriers willing to accept significant losses to expand their market share," it said. "This is putting pressure on yields at the Network Airlines and Eurowings. Both will continue to vigorously defend their leading market positions while focusing on securing profitability at the same time."
Network Airlines is now expected to reach an adjusted EBIT margin of between 7% and 9% versus 7.5% to 9.5% previously. For Eurowings, Lufthansa now expects an adjusted EBIT margin of between -4% and -6% compared to 0% previously.
The company also said that it would make a €340m provision in its first-half accounts related to an open tax matter in Germany between 2001 and 2005.
"The group expects the European market to remain challenging at least for the remainder of 2019," it said.
At 0850 BST, Lufthansa shares were down 11.4% at €15.66.
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN