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Lufthansa 2013 profit outlook disappoints, shares hit

A Lufthansa Airbus A 320 takes off on runway "Startbahn West" at Frankfurt airport July 12, 2013. REUTERS/Ralph Orlowski

By Maria Sheahan

FRANKFURT (Reuters) - Germany's Lufthansa (LHA.DE) unveiled a new 2013 profit outlook that fell short of expectations, driving its shares lower, as restructuring costs and volatile exchange rates weighed on its earnings.

The German flagship airline, like peers such as Air France-KLM (AF.PA), is restructuring as it struggles to remain profitable despite cut-throat competition and soaring costs.

The German flagship airline said on Tuesday it saw its full-year operating profit rising to between 600 million and 700 million euros ($820-960 million) from 524 million in 2012, including about 300 million of restructuring and project costs.

That compares with a previous outlook for a year-on-year rise but is well below the consensus for 917.5 million euros, according to Thomson Reuters StarMine SmartEstimates, which weight analysts' estimates according to their track record.

"It is fair to say that a better result was spoiled by exchange rate effects," Lufthansa finance chief Simone Menne told analysts and journalists during a conference call.

She declined to quantify the exchange rate effects or specify which currencies had the biggest impact before the company publishes full nine-month results on October 31.

Shares in Lufthansa slid on the news and were down 2.5 percent at 14.49 euros by 0859 GMT, making them the biggest decliners on the STOXX Europe 600 Travel & Leisure (.SXTP) index, which was unchanged.

"Investors had expected more," a trader said.

Lufthansa's biggest rivals, British Airways and Iberia owner IAG (IAG.L) and Air France-KLM, were down 1.2 percent and 1 percent respectively.


Lufthansa is cutting 3,500 jobs and has merged its European short-haul services with discount unit Germanwings as part of a program that aims to boost annual operating profit to 2.3 billion euros in 2015.

But soaring fuel prices, pricing pressure and negative exchange rate effects are making it difficult to reach that target, which could force it to deepen cuts.

In addition, the unexpected departure of Chief Executive Christoph Franz, announced last month, has put Lufthansa under pressure to find a new leader to help it stay on course.

CFO Menne said she expected to see further negative effects on yields, a gauge of the average fare paid per kilometer flown, in the fourth quarter, especially in Asia.

"If we talk about yields without currency (effects) we have a development that is not bad, so it's mainly the currency impact," she said.

Air freight business Lufthansa Cargo also fell short of expectations in terms of pricing, Menne said. "What we see is that the (cargo) market is not catching up," she said.

In the first nine months of 2013, the Lufthansa group's operating profit dropped 27 percent to about 660 million euros, missing consensus of 749 million.

Excluding restructuring and project costs, operating profit came to about 860 million euros, Lufthansa said, and revenues were stable at 22.8 billion euros.

($1 = 0.7312 euros)

(Additional reporting by Daniela Pegna; Editing by Christoph Steitz and Elizabeth Piper)