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Global airlines warn of stormy 2009

Published on 12/03/2009

Frankfurt -- Global airlines face a stormy economic climate, with German carrier Lufthansa warning of a tough 2009 on Wednesday after Cathay Pacific and Delta posted heavy losses for last year.

Lufthansa said its 2008 net profit fell 64 percent to 599 million euros (760 million dollars) and that it expected a further drop this year.

The drop reflected the fact that record 2007 results were boosted by one-off items but Lufthansa warned the 2009 figure would also "be clearly below the previous year’s result."

A statement said that "in view of the dramatically deteriorating framework conditions, the further development of business is associated with significantly higher risks than usual."

The forecast came after two other major airlines, Cathay Pacific, one of Asia’s top carriers, and Delta of the United States, posted heavy losses for 2008, with the former also forecasting "an extremely challenging year in 2009."

Cathay Pacific said it lost more than one billion dollars last year, its first annual loss in a decade and a huge drop from the previous year’s profit of almost 900 million dollars.

US carrier Delta lost a whopping 8.9 billion dollars and said it would cut another 10 percent from international capacity and suggested more jobs might disappear as well.

Delta’s loss was partly the result of heavy charges related to its purchase of Northwest Airlines.

But the International Air Transport Association has reported that January traffic showed a deepening slump in demand, with a drop of 5.6 percent from the same month a year earlier, the fifth consecutive decline.

For Lufthansa, the profit downturn was mainly the result of "negative developments in the passenger transportation business segment" as fewer company managers and executives took to the skies.

Lufthansa chairman and chief executive Wolfgang Mayrhuber said 2009 would present a "far more challenging environment" but that the airline’s financial situation and flexibility could lead to payoffs as well.

"Crises always seem to have a repositioning aspect to them and we will be sure to secure the right position for the future," he said.

In Montreal, Canadian plane maker Bombardier said Wednesday that Lufthansa had ordered 30 CS100 planes in a deal valued at 1.53 billion dollars.

The German carrier stemmed 2008 losses in operating profit, which slipped just 1.7 percent to 1.35 billion euros, while revenue rose 10.9 percent to 24.9 billion euros.

Cathay Pacific also posted a sales increase, with a gain nearly 15 percent to 11.1 billion US dollars.

But the Hong Kong-based carrier saw cargo business falter late last year as demand for goods made in southern China collapsed amid the global downturn.

Lufthansa finance director told a press conference in Frankfurt that freight operations had "dropped brutally since December."

Delta told staff meanwhile that international services would be cut back again and that while it preferred to trim the workforce with voluntary departures, layoffs might be necessary.

"In just the few months since we last announced capacity reductions, revenues have weakened, particularly in international markets," an internal memo said.

Lufthansa chairman Mayrhuber concluded that "one of the most challenging years in its history lies ahead of the aviation industry."

Ireland’s Aer Lingus, which has adopted a low-cost model, also suffered, plunging to a 2008 pre-tax loss of 119.7 million euros after a 2007 profit of 124.8 million euros.

In a "weak and rapidly deteriorating operating environment," the airline warned it would experience a larger operating loss this year and "is unlikely to meet its previous guidance of a pre-tax profit in 2009."

Chief executive Dermot Mannion said conditions were "exceptionally challenging" in 2008, with "falling consumer demand in key markets, a weakening dollar and sterling, and increased competition across the network."

Bill Ickes/AFP/Expatica