Now Reading
Uh Oh: Lufthansa Misses Financial Forecasts On the Back of Losses at Low-Cost Subsidiary, Eurowings

Uh Oh: Lufthansa Misses Financial Forecasts On the Back of Losses at Low-Cost Subsidiary, Eurowings

Uh Oh: Lufthansa Misses Financial Forecats On the Back of Losses at Low-Cost Subsidiary, Eurowings

European aviation heavyweight, Lufthansa – which also owns Austrian Airlines, Brussels Airlines, Eurowings and SWISS – has posted below expected financial results for Quarter 3.  During the first nine months of the year, the Lufthansa Group has reported a profit of €2.4 billion – 7.7% below what it made during the same period in 2017.

Lufthansa has partly attributed the profit decline to a €65 million loss it made at low-cost subsidiary Eurowings.  Last year, Lufthansa bought part of bankrupt competitor airberlin and cites integration costs for the loss.  Eurowings is also said to have suffered significant costs as a result of flight delays and cancellations – in part, due to air traffic control delays and weather disruption throughout Europe during the summer.

An increase in fuel costs of around €536 million is also said to have “burdened” the Lufthansa Group airlines.  By the end of 2018, the airline says it expects fuel costs to have risen by a huge €1 billion.

Describing 2018 as “challenging”, the chief executive of Deutsche Lufthansa AG, Carsten Spohr said the aviation group had demonstrated “sustainable financial strength” throughout the year.  Spohr says he expects ticket prices to rise in 2019 to offset ever increasing fuel prices.

Eurowings reported a significant loss - due in part to its integration of airberlin and a rapid expansion plan. Photo Credit: Eurowings
Eurowings reported a significant loss – due in part to its integration of airberlin and a rapid expansion plan. Photo Credit: Eurowings

The Lufthansa Group has so far carried some 108.5 million passengers this year, achieving a load factor of 82%.  In comparison, the IAG Group which owns the likes of British Airways and Iberia reported a load factor of 83.9%, while Norwegian recorded a 90.5% load factor during the same period.

SWISS proved to be a star performer, increasing profits by 18.8% on the same period last year to €525 million.  Going forward, Lufthansa Group airlines plan to increase growth during the winter by just 8% – a more sluggish growth of just 3.8% is then expected for Summer 2019.

Along with rising fuel prices, Lufthansa is also facing stiff competition on the back of the demise of airberlin which has allowed low-cost rivals the opportunity to expand in Germany and beyond.  In Vienna, Lufthansa also expects Austrian Airlines to face tougher competition from Ryanair-backed Luadamotion and IAG startup, LEVEL.

BoardingArea