Lufthansa (Lufthansa Group) (Frankfurt) has adjusted its earnings forecast. The company issue this revised forecast:
Deutsche Lufthansa AG is adjusting its earnings forecast as a result of the revenue development in the passenger and cargo businesses, which is below expectations: the company’s Executive Board is now projecting an operating profit for the current financial year of approximately EUR 1 billion ($1.35 billion)(approximately EUR 1.3 billion after adjustment for one-off effects). Previously the company had been forecasting an operating profit for 2014 of EUR 1.3 to 1.5 billion (EUR 1.7 to 1.9 billion after adjustment for one-off effects).
“The revenue risks mentioned when we presented the quarterly figures in early May have unfortunately materialized”, said Simone Menne, Chief Officer Finances and Aviation Services at Deutsche Lufthansa AG. The Group had already warned against increasing risks to the earnings forecast in the first quarterly reports. Above all it is the Group’s American and European business that has suffered from increasing excess capacity, which leads to falling prices on these routes. “We will therefore noticeably reduce our capacities during the winter timetable period”, emphasized Menne. Strong capacity growth by state-owned Gulf carriers was a major concern, she added. They are advancing ever further into the European market, also by means of investments in European airlines, she explained
The strike by the “Vereinigung Cockpit” pilots’ union in early April, had a negative results impact of EUR 60 million ($81.2 million). Only recently has booking activity returned to normal. Additionally, impairments on receivables denominated in Venezuelan Bolivar have burdened the result of the current year by EUR 60 million so far.
Given these economic developments the Executive Board no longer believes that the earnings target for 2015 of EUR 2.65 billion ($3.58 billion) set as part of the Score program can be achieved. The company nonetheless intends to substantially increase its operating profit compared with the current year. The basis for this will be laid with the noticeable reduction of capacities during the winter timetable period. Additionally, in order to boost the competitiveness of the Lufthansa Group, structural measures will be implemented at a higher pace. The details will be presented by Carsten Spohr, Chairman and CEO of the Executive Board in July. The Executive Board sets a new target of approximately EUR 2 billion on an operating profit level for 2015, provided that conditions remain stable. Menne emphasized: “The current development underlines the importance of Score for the group. We are achieving a sustainable reduction of our unit costs and now aim to stabilize the revenue trends, in order to counteract an ever intensifying competitive situation”, said Simone Menne.
Copyright Photo: Javier Rodriguez/AirlinersGallery.com. Airbus A320-214 D-AIUD (msn 6033) is the only A320 painted by Lufthansa in the special “Fanhansa” colors for the 2014 FIFA World Cup Brazil.