Germany’s Lufthansa sent shockwaves through the European airline sector on Monday as it cut its full-year profit forecast, with lower prices and higher fuel costs compounding the effect of losses at its budget subsidiary Eurowings.
EUROPEAN AIRLINE STOCKS KNOCHED BY LUFTHANSA PROFIT WARNING
The warning follows gloomy comments last month from Irish budget airline Ryanair, which vies with Lufthansa for top spot in Europe in terms of passengers carried. Air France-KLM also reported a widening quarterly loss last month.
In a statement issued late on Sunday, Lufthansa forecast annual EBIT of between 2 and 2.4 billion euros, down from the previously targeted 2.4 billion euros to 3 billion euros. “Yields in the European short-haul market, in particular in the group’s home markets, Germany and Austria, are affected by sustained overcapacities caused by carriers willing to accept significant losses to expand their market share,” it said.
European airlines are locked in a battle for supremacy, with a surfeit of seats holding down revenues and higher fuel costs adding to the pressure. A number of smaller airlines have collapsed over the past two years.
Lufthansa cited falling revenue from its Eurowings budget business as a key reason for the profit warning. “The group expects the European market to remain challenging at least for the remainder of 2019,” it said. It also pointed to high jet fuel costs, which it said could exceed last year’s figure by 550 million euros, despite a recent fall in crude oil prices.
Shares in Lufthansa hit a two-year low of 15.40 euros for their highest intraday loss in three years. They were down 12 percent at 15.55 euros by 0900 GMT.
Rivals were also caught up in the turbulence, with shares in Ryanair, British Airways owner IAG, Wizz Air, Air France and Easyjet falling by up to 4.4 percent.