High fuel costs drive Lufthansa deeper into red in Q1

Lufthansa has blamed rising fuel prices and competition in Europe for its negative bottom line
Lufthansa has blamed rising fuel prices and competition in Europe for its negative bottom line

German airline group Lufthansa plunged deeper into the red in the first quarter, it said Tuesday, blaming the rising price of fuel and intense competition in Europe but sticking to annual targets.

Between January and March, the Frankfurt-based group lost 342 million euros ($382 million), almost nine times worse than in the first quarter of 2018.

Lufthansa had warned earlier in April of the looming negative bottom line, suggesting an operating, or underlying loss of 336 million euros was in the offing—a figure confirmed Tuesday.

Meanwhile revenues were up three percent year-on-year, at 7.9 billion euros.

"The first quarter is traditionally a difficult one for airlines," the group said, with seasonal effects worsened by a 202-million-euro rise in fuel costs compared with last year.

Looking ahead to the full year, Lufthansa now expects spending on jet fuel to rise by 700 million euros to 6.8 billion euros.

Last year's bill was already up 850 million euros on the previous year.

"A continued reduction of unit costs could only partially offset the decline" in earnings caused by higher fuel costs and competition squeezing ticket prices in Europe, the group said.

Finance director Ulrik Svensson said he was "confident" for the remainder of 2019, highlighting "favourable booking levels for the months ahead".

Lufthansa expects to achieve an operating margin of between 6.5 and 8.0 percent, compared with 7.9 percent in 2018.

But capacity growth will slow to 1.9 percent as the group faces a "bottleneck in infrastructure" with airports struggling to deal with rising passenger numbers.

Shares in Lufthansa had shed 0.4 percent around 1:00 pm in Frankfurt (1100 GMT) against a flat DAX index of blue-chip shares, to trade at 22.12 euros.

In a conference call later Tuesday, finance chief Svensson acknowledged that the worldwide grounding of Boeing's 737 MAX planes after two deadly crashes could have affected passengers' confidence in the US manufacturer's flagship aircraft.

Lufthansa does not currently operate any 737 MAX planes.

But while Lufthansa is "not excluding any options" for upcoming plane purchases, the fall in trust would be "really a discussion and a question for next year," he said.

Carrier Virgin Australia said Tuesday it would delay orders for 48 Boeing planes over security concerns.


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