A costly workaround

17 March 2016 By Olaf Storbeck

The German carrier is boxed in by Gulf airlines, no-frills rivals, high costs and stubborn pilots. Cheap oil helps only slightly. Boss Carsten Spohr’s convoluted strategy makes bits of Lufthansa look more like a job centre than an airline. At best, it’s the least bad option.

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German airline group Lufthansa on March 17 forecast slightly higher operating profit in 2016 thanks to lower fuel prices, but expects price pressure from rivals and falling ticket yields as it ramps up its Eurowings budget unit.

Alongside a 1 billion euro drop in its fuel bill for 2016, Lufthansa said it would lower costs, after its 2015 unit costs, excluding fuel and currency effects, increased 2.4 percent.

The group reported operating profit, adjusted for various factors including pension charges and asset sales, of 1.82 billion euros in 2015, in line with its forecast and against the average analyst expectation in a Reuters poll of 1.84 billion euros.

It proposed a dividend payment of 0.50 euros per share. At 1045 GMT on March 17, Lufthansa shares were down 5.9 percent to 14.38 euros.

Lufthansa’s Chief Executive Carsten Spohr said on March 17 that the Germanwings tragedy, in which a Germanwings co-pilot crashed his jet into the Alps in March 2015 and killed 150 people, had made 2015 ”an emotionally very challenging year for the Lufthansa Group”.

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