Profit for Lufthansa Group collapses in deep red

by Mario Masciullo, special to eTN

In the second quarter of 2019, the Lufthansa (LH) Group profit fell to -70% (about 226 million euros). The LH  economic loss net result for the entire half-year amounts to 116 million (against a profit of 713 million in 2018).

On the one hand, the LH Group, led by Carsten Spohr, collects the positive result of the routes on North America and Asia, which drive long-range performance. On the other hand, the “price war” with the low-cost airlines in Europe (especially in Germany and Austria) weighs heavily on their accounts (and also on fuel).

Thus, in the period April-June 2019, LH gave up 25% of the adjusted EBIT, amounting to 754 million euros, despite revenues having grown by 4% annually to reach 9.36 billion euros.

According to the LH CFO Ulrik Svensson: “Our profits are suffering the effects of strong European competition and excessive supply, especially in Germany and Austria. The European market will remain difficult until the end of 2019. Our answer is in further cost reduction and greater flexibility. Finally, the investment plan already presented for Eurowings will bring our carrier to sustainability.”

Despite all, the Group confirmed the annual results, already reduced in June, provides for an operating margin of between 5.5% and 6.5% against 7.9% in 2018 and an operating profit between 2 and 2.4 billion.

According to the note from LH, in the first half of 2019, the costs of Lufthansa, Swiss, and Austrian Airlines decreased by 0.2%. On the Eurowings side, however, the low-cost rib shows adjusted earnings before interest and taxes (EBIT) of -273 million in the first half of the year against -220 million in 2018.

The return to assets of Eurowings, announced initially for this year, should slip to 2021 thanks to a 3-year cut of 15% of the costs.