Lufthansa sees profit gains held back by revamp costs
FRANKFURT (Reuters) - Deutsche Lufthansa (LHAG.DE), Europe's biggest airline by revenue, said a tough economic outlook and restructuring costs would limit operating profit growth this year and next.
European carriers including Lufthansa, Air France-KLM (AIRF.PA) and British Airways (ICAG.L) are slashing jobs and shelving growth plans as they grapple with soaring jet fuel prices, a weak economy and fierce competition from low-cost carriers and Middle East airlines.
Lufthansa is cutting 3,500 jobs, revamping low-cost carrier Germanwings and bundling procurement for its airlines. It hopes its restructuring program - dubbed SCORE - will help boost operating profit to 2.3 billion euros ($3 billion) in 2015, compared with 524 million last year.
"We should not get our expectations too high for 2013," Chief Executive Christoph Franz said on Thursday as he presented full 2012 financial results. "Our 2013 result shall have to bear the burden of the restructuring and project costs."
Excluding restructuring costs of 160 million euros, the revamp program's hundreds of projects contributed 618 million euros to earnings in 2012. That figure will rise to 740 million euros this year, Lufthansa said.
The company's shares were up 3.2 percent in early trading, outperforming a 0.9 percent rise in Germany's DAX index.
SOARING FUEL BILL
Lufthansa reported last month its 2012 operating profit dropped 36 percent as the price of jet fuel rose and it spent money on its restructuring program.
Analysts on average see Lufthansa's operating profit rising to 1.1 billion euros this year and to about 1.3 billion euros next year, according to Thomson Reuters data.
Fuel accounts for more than a fifth of Lufthansa's operating costs, and its fuel bill rose almost 18 percent to 7.4 billion euros in 2012 from 6.3 billion a year earlier.
Lufthansa was the only major European legacy airline to posted a net profit for 2012, helped by a 623-million-euro gain from the sale of shares in Amadeus IT Holding.
Nonetheless, it scrapped its dividend for 2012, choosing instead to bolster its fleet and fund future restructuring, despite net profit that beat the most optimistic analyst forecasts.
Lufthansa said its supervisory board approved the purchase of 108 new aircraft on Wednesday. The aircraft with a total list price of 9 billion euros include two mammoth A380 jets for its main Lufthansa brand and six Boeing 777-300s for carrier SWISS.
Lufthansa said it saw net profit declining this year from 2012's 990 million euros but did not provide a specific target. Analysts see net profit of 545 million euros this year.