Lufthansa Group’s second quarter earnings declined as rising competition and weak demand in Europe’s air travel market hit figures, while it warned the industry will likely remain challenging for the rest of 2019.
The German airline group reported that EBIT for the quarter was €754 million, a 25 per cent fall on the €1 billion in the second quarter in 2018. Fuel costs alone were €255 million higher in the second quarter of 2019 than in the previous year.
Group revenues did though rise by four per cent to €9.6 billion, up from the €9.3 billion in the same quarter in 2018 and by three per cent in the first half of the year to €17.5 billion.
The Group’s net profit for the first-half year period amounted to a loss of €116 million (2018: €713 million), owing to a revaluation of a tax risk in Germany for which provisions of €340 million were required.
First-half year adjusted EBIT for the catering business of the LSG Group declined to €33 million (2018: €40 million). The reduction was attributed to the restructuring of the Group’s European business, which is centralising production sites and bringing more flexibility to logistics processes.
“Our earnings are feeling the effects of tough competition in Europe and sizeable overcapacities, especially on our short-haul routes out of Germany and Austria,” said Ulrik Svensson, chief financial officer.
“We are responding to this by further reducing our costs and increasing our flexibility. And with the turnaround plan which we recently presented, we also intend to make Eurowings a sustainably profitable airline,” Svensson added.
On a positive note, the Lufthansa Group reported a strong performance in its long-haul business in the first half of 2019, particularly on its key North American and Asian routes. On short-haul routes in Europe, the carrier said the price war in Germany and Austria in particular had a negative impact on earnings.
The Lufthansa Group said it expects to report a low single-digit percentage increase in total revenues and an adjusted EBIT margin of 5.5 to 6.5 per cent for the full year 2019.