Lufthansa looks to expand after years of cost-cutting

 25 Oct 2017 - 22:02

Lufthansa looks to expand after years of cost-cutting
Lufthansa CEO Carsten Spohr addresses a news conference at the company's headquarters in Frankfurt, Germany, March 17, 2016. Reuters/Kai Pfaffenbach

AFP

Frankfurt am Main:  German airline group Lufthansa confirmed its objectives for the full year Wednesday, reporting a third quarter that saw it beat analysts' expectations even as it gobbled up parts of bankrupt rival Air Berlin.

"The Lufthansa group is back on the offensive and our figures show it," chief executive Carsten Spohr told journalists during a telephone conference.

Between July and September -- the key summer holiday period for European carriers -- Lufthansa's net profit fell by 17 percent year-on-year to 1.18 billion euros ($1.4 billion).

But the decline was largely due to an accounting effect, the airline said in a statement.

In the third quarter of 2016, Lufthansa's bottom line had been boosted by the elimination of provisions following a pay and pensions deal with staff.

The third-quarter figure for this year nevertheless beat analysts' expectations slightly.

And underlying or operating profit -- Lufthansa's preferred measure of its own performance -- increased by 32 percent to 1.52 billion euros.

The group said higher ticket prices, subsidiary Brussels Airlines integrating into its books and leasing a number of planes from competitor Air Berlin ahead of its bankruptcy all flowed into higher revenues, which grew 11 percent to 9.81 billion euros.

Profit margins increased at all of its airlines -- Lufthansa, Eurowings, Swiss, Brussels Airlines and Austrian Airlines -- as well as at freight business Lufthansa Cargo.

The result "gives us the investment and growth capabilities we need to play an active part in the consolidation of the European airline market," Spohr said.

For the full year, Lufthansa confirmed its forecast for an increase in operating profit from the 1.75 billion euros reported in 2016.

Over the first nine months, it had already achieved 2.6 billion euros in operating profit.

Monopoly concerns

After years spent looking for savings and smoothing over frictions with different groups among its 130,000 employees, Lufthansa has once again turned its eyes outward with plans to expand across the skies of Europe.

Lufthansa has snapped up more than half the aircraft belonging to bankrupt former competitor Air Berlin and recently made an offer to take over some European routes from Italy's Alitalia.

Brussels will have its say on the Air Berlin acquisition, with the group hoping the European Commission's competition regulators will give the green light by the end of the year.

"On some routes there is now a very high market share or even a monopoly... it's our job to stop that," competition commissioner Margrethe Vestager told the Frankfurt Allgemeine Zeitung daily Wednesday.

Lufthansa may have to give up some of those connections to win the Commission's favour, she added.

Chief executive Spohr said Wednesday that he was "ready" to give up some slots in exchange for the deal going ahead.

The planes bought from Air Berlin will go to strengthen the fleet at Eurowings, Lufthansa's low-cost subsidiary -- expected to report a net profit for the first time this year.

Lufthansa topped the DAX index of blue-chip German shares around 1230 GMT Wednesday, with stock trading up 2.8 percent at 26.92 euros.