Less profit for Lufthansa
Author: Marcus Schilling
Aggressive price war is to blame
Lufthansa suffered massive losses in terms of profits: For the current year, the airline had to adjust its business target downwards. One of the reasons for this is the fierce price war in European air traffic, because the “aggressive” expansion of low-cost airlines is depressing ticket prices.
Lufthansa predicts that the Dax Group’s operating profit will amount to 2.0 to 2.4 billion euros this year. Previously, EBIT was estimated to be between 2.4 and 3.0 billion euros. In 2017, the airline achieved a record result and an operating profit of around 3.0 billion euros. In 2018 the figure was around 2.8 billion euros.
Eurowings slumps as well
The business of the low-cost subsidiary Eurowings is also not positive: the profit targets are missed due to fierce competition. Eurowings announced that they would be in the red this year.
In order to secure and expand market shares, the competition was prepared to accept substantial losses. This also had an impact on Eurowings. Furthermore, management estimates that the European market will remain so challenging until the end of 2019.
Furthermore, it was predicted that average revenues would “significantly” decline in the current second quarter. Overall, the decline is expected to be in the mid single-digit percentage range. According to Eurowings, Eurowings would now like to take further measures to turn the tide.
The freight business is also not going as well as predicted. Lufthansa Cargo had to take three older freighters out of service and has planned stagnating sales this year. From the revenues, only 3 to 5 per cent should make it into the operating profit – about half as much as planned.
Outside the business, the Group had to expect higher tax payments for earlier years due to a new ruling of the Federal Fiscal Court. As a result, a provision of 340 million euros was set aside.