Lufthansa struggles to rein in costs as fare pressures loom | Fin24
  • Mpumalanga Mine

    Constitutional Court rejects coal mining company’s attempt to appeal – but the saga isn’t over.

  • Audit Outcomes

    Turnaround plans had virtually no impact for ailing parastatals, the Auditor-General has found.

  • Battery Power

    Gordhan: Government intends to sign off soon on a "world class" battery storage project.


Lufthansa struggles to rein in costs as fare pressures loom

Jul 18 2017 10:30
Richard Weiss, Bloomberg

Frankfurt - Deutsche Lufthansa struggled to reduce operating costs, setting up the German airline for a difficult second half with pressure on fares set to intensify.

The shares fell as much as 4.3%, the biggest intraday drop in three months, despite Lufthansa raising its 2017 operating profit forecast to gradually catch up with analyst estimates. While first-half earnings almost doubled on stronger traffic, investors focused on the company’s lack of progress in responding to lower cost rivals.

“We remain concerned that Lufthansa is not making sufficient progress in improving competitiveness in its core businesses,” Gerald Khoo, a London-based analyst at Liberum, said in a report to clients. Bankhaus Metzler analyst Guido Hoymann downgraded his recommendation on Lufthansa to sell from hold.

Lufthansa shares had been trading at a nine-year high as the company said in its last two monthly traffic reports that ticket pricing was “ positive.” The company said in a statement late on Monday that the trend for unit revenue, a measure of pricing per seat, will be “negative” in the second half.

The carrier, which has its main bases in Frankfurt and Munich, has capitalised on the added demand by leasing extra aircraft from ailing rival Air Berlin and acquiring full control of Brussels Airlines, which is combining with the Eurowings low-cost arm that Lufthansa is seeking to expand.

Amid the expansion push, Lufthansa still has to agree on wage and retirement terms with its pilots union. Even if the carrier succeeds in reducing unit costs at Eurowings as planned, the arm’s costs will still be far higher than those at budgets rivals such as Ryanair.

Lufthansa shares fell 3.1% to €20.46 at 9:47. Still, the stock is the best performer this year on Germany’s benchmark DAX Index with a 67% gain.

SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.

Read Fin24's top stories trending on Twitter:

lufthansa  |  travel and leisure


Company Snapshot

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

What do you think about private healthcare in SA?

Previous results · Suggest a vote