Lufthansa profit warning

Always seen as cautious and well run airline, Lufthansa has issued a profit warning, blaming pressure on fares in Europe and the US.  The company singled out the fast-growing Gulf carriers as a “major concern” for airlines in Europe.  Strike action by pilots also did not help.

The airline said it expected to make an operating profit of €1bn (£805m) this year, down from its previous forecast of between €1.3bn and €1.5bn.

A target of €2.65bn of earnings in 2015 has also been scrapped, despite the firm’s ongoing cost-cutting drive.  The board said it has proposed a lower target of €2bn to new Chief Executive Carsten Spohr, who took charge in May.

Lufthansa’s finance boss Simone Menne said that the carrier would review its spending plans and “noticeably reduce” its flights this winter to try to counteract the excess capacity that is dampening prices.

There are some possible future problems. The airline has a habit of ordering new aircraft off the drawing board, a successful example being the Boeing 737.  However in recent years the Dornier 728, for which it was the lead airline, never actually flew, and Lufthansa subsidiary Swiss is due to be the lead carrier for the much delayed Bombardier CSeries.  www.lufthansa.com

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