Airline now expects operating profit of €1bn in 2014
Lufthansa says that competition from Middle East and low-cost carriers has forced it to cut its profit targets for the next two years. Lufthansa shares dipped 16% on the news.
The warning also hit other European legacy airlines, with Air France-KLM losing 6% and IAG, which owns British Airways and Iberia, 4.5%.
The announcement came as something of a surprise, as Lufthansa had posted better-than-expected results in May. But it now expects operating profit of €1 billion in 2014, down from its earlier forecast of €1.3 billion to €1.5 billion. Its 2015 earnings target is now €2 billion, not €2.65 billion.
“There is overcapacity in the North Atlantic,” head of finance Simone Menne said pointing to problems with pricing for business and first-class seats on European and US routes, where airlines have recently been increasing the number of seats available. There are also weakness in Lufthansa’s cargo operations.
[pictured: Lufthansa 747-8 Intercontinental]