Slowing economy hit Lufthansa earnings, dip 27pct

Deutsche Lufthansa AG, Europe’s second-biggest airline, said third-quarter earnings dropped 27 per cent, missing estimates, as a slowing economy hurts bookings.

Operating profit fell to €575 million ($805m) from €783m a year earlier, the Cologne, Germany- based company said in a statement today.

Lufthansa has cut a planned increase in winter capacity by two-thirds to four per cent as slowing growth, declining consumer confidence and Europe’s sovereign-debt crisis hurt demand. Full- year operating profit will still be in the high hundreds of millions of euros, Chief Executive Officer Christoph Franz said.

“Fears of a recession and concerns about the effects of the debt crises in Europe and the US have already had a clear effect,” Franz said today. While the result “does not have us jumping for joy,” Lufthansa is still seeking annual earnings in “the upper three-figure million euro range” as many rivals are “struggling to make figures that are not in the red,” he said.

Lufthansa rose 2.6 per cent and was trading two per cent higher at €10.25 as of 9:02am in Frankfurt, where the company also has its main hub, giving a market value of €4.68bn. The stock has declined 37 per cent this, compared with a 32 per cent drop in the six-member Bloomberg EMEA Airlines Index.

The company is continuing to explore “various disposals and strategic options” for the UK-based BMI unit, where the nine-month operating loss widened to €154m from €90m. The business is also unlikely to match 2010’s full-year revenue and earnings figures, the statement said.

Analysts had expected a third-quarter operating profit of €646m, based on five estimates. Sales rose 6.7 per cent in the period to €8.08bn and net income declined 21 per cent to €494m, Lufthansa said.

Earnings at the passenger-airlines unit deteriorated as new bookings “declined considerably,” it said.

Airline-industry earnings will drop by more than half this year and 40 per cent in 2012, with the risk on the downside, the International Air Transport Association trade group reckons.

Lufthansa said September 20 it would miss a goal of beating 2010’s €876m operating profit while achieving a total at the upper end of a “three-digit million euro range.”

Karl Ulrich Garnadt, chief executive officer at Lufthansa Cargo, said last week that a night-flight ban in Frankfurt will cost at least €10m per year.

Air France-KLM Group, Europe’s biggest airline, reduced its earnings target in July, saying it aims to break even this year versus a year-earlier operating profit of €28m. The Paris-based company has pared a winter-capacity increase to 3.4 per cent, cutting long-haul growth by almost half to 2.6 per cent.

Air Berlin Plc, Europe’s third-biggest discount airline, said yesterday quarterly profit minus interest and tax fell 44 per cent to €96.8m, 30 per cent short of estimates.