Home News Lufthansa stock dips on muted 2019 outlook

Lufthansa stock dips on muted 2019 outlook

Published on March 17, 2019

Shares in Lufthansa fell sharply Thursday, after Europe’s largest airline group reported a drop in profits for 2018 and warned that capacity bumping up against limits at overcrowded airports would hem in growth this year.

Net profits at the Frankfurt-based group amounted to 2.2 billion euros ($2.5 billion), down 8.0 percent year-on-year.

Disruption to air traffic, higher fuel costs and the pricey acquisition of large parts of defunct competitor Air Berlin all weighed on the result, Lufthansa said, outweighing a 6.0-percent boost in revenues to 35.8 billion euros.

Shares in the group plunged by more than five percent to 21.68 euros in midday trading in Frankfurt, making Lufthansa the worst performer on a blue-chip DAX index down 0.12 percent.

Looking ahead to 2019, Lufthansa’s executives said they had cut back their targets for capacity growth, or increasing the number of seats available, as infrastructure bottlenecks at airports and air traffic control make adding new flights a challenge.

In summer, Lufthansa’s capacity will be 1.9 percent higher than last year — half the increase previously announced.

“Overall, the signals we are getting from air traffic control are worrying,” chief executive Carsten Spohr told reporters, warning that German air traffic control staff wasn’t growing fast enough to keep pace with projected rises in flight traffic.

He also cautioned that not enough was being invested to modernise airport infrastructure.

“We can’t afford these operational bottlenecks and technological backlogs in a globally competitive industry,” Spohr said.

Over 2019, Lufthansa expects revenues to grow by between four and six percent.

But it sees its operating margin likely slipping from the 7.9 percent recorded in 2018, giving a range of 6.5 percent to 8.0 percent for 2019.

Fuel prices are expected to increase further this year after rising 850 million euros in 2018, when the group also booked 518 million in costs for delayed and cancelled flights.

Finance director Ulrik Svensson promised to “further enhance our cost efficiency” after achieving the third annual reduction in outlays in a row.

2018’s result was also burdened by 170 million euros over the first three quarters from the integration of Air Berlin into Lufthansa’s low-cost arm Eurowings — a process the group says is now complete.

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