Frankfurt: German airline Lufthansa repeated a warning that terrorism fears would weigh on bookings and profits in the second half of the year as it reported a solid increase in underlying profits in the first half on the back of cost controls and lower fuel prices.
Once stripping out one-off factors that distort annual comparisons, Lufthansa said on Tuesday that adjusted earnings before interest and taxes – the company’s usual profit gauge – rose 61 million euros (Dh250.2 million) to 529 million euros ($585 million) in the same period last year. If those one-off factors are included, net profit more than halved to 429 million euros from 954 million euros, when profits were boosted by 503 million euros through the early conversion of a convertible bond.
The airline credited strict management of seat capacity for an increase of 3.8 per centage points in the profit margin at its passenger airline business, to 5.2 per cent. However, Lufthansa’s cargo business saw a fall of 95 million euros in first-half earnings due to “massive market overcapacities” while yields from air freight had fallen to levels last seen during the financial crisis in 2009.
CEO Carsten Spohr said in a statement that the company achieved “a solid result” in the first half, but warned that “our industry has to prepare for a difficult” second half. The company has already had to abandon its earnings forecast for the full year, saying it expects profits to be below last year’s, instead of slightly above.
“The terrorist attacks in Europe and also the increasing political and economic uncertainties are having a tangible impact on passenger volumes,” said Spohr, who noted a particular impact on forward bookings for long-distance flights to Europe.
Europe has witnessed a series of attacks over the past year, including last November’s in Paris which killed 130 people and the bombings at the Brussels airport and subway in March that killed 32.
Recently, Germany itself has witnessed an axe-and-knife attack by a 17-year-old Afghan refugee who injured 5 people in Wuerzburg on July 18 and a suicide bombing that injured several people outside a wine-bar in Anspach, Germany on July 24.
Lufthansa shares fell 0.5 per cent to 10.68 euros in morning trading in Europe.
