Lufthansa sees efficiency measures boosting earnings this year

FRANKFURT Thu May 2, 2013 6:27am EDT

A passenger walks past an empty counter during a warning strike of German air carrier Lufthansa ground personnel at Tegel airport in Berlin, April 22, 2013. REUTERS/Fabrizio Bensch

A passenger walks past an empty counter during a warning strike of German air carrier Lufthansa ground personnel at Tegel airport in Berlin, April 22, 2013.

Credit: Reuters/Fabrizio Bensch

FRANKFURT (Reuters) - German airline Lufthansa (LHAG.DE) vowed to deliver on profit-boosting initiatives this year, saying painful cost cuts would pay off and forecasting a rise in revenue.

Shares in Europe's biggest airline by sales rose 2.6 percent to 15.58 euros by 5:47 a.m. ET, after rising as high as 16.06 euros, their highest since late March.

The airline said it expects higher operating profit and revenue in 2013, driven by a restructuring program dubbed SCORE that had helped offset soft demand in January to March as Europe's debt problems weighed on consumer sentiment.

"2013 is the year in which we want to show that we are capable of implementing our ambitious plans," Europe's biggest airline by sales said on Thursday.

Like Air France-KLM (AIRF.PA) and International Consolidated Airlines Group (ICAG.L), which groups British Airways and Iberia, Lufthansa is the midst of deep cutbacks to cope with soaring fuel costs and tough competition from Gulf and low-cost carriers.

Chief Financial Officer Simone Menne told reporters details on revamping the passenger division would be announced in May, raising the prospect of a wider restructuring.

The passenger business managed to eke out a 0.6 percent growth in quarterly revenue to 5.07 billion euros, mainly through tightened seating capacity growth.

The airline's first-quarter operating loss remained at 359 million euros ($474 million), a bigger loss than the 299 million expected and hit by 64 million in restructuring costs, strikes and a long winter.

Revenue grew only 0.1 percent to 6.63 billion versus a forecast 6.65 billion.

Analysts said while the quarterly results were somewhat disappointing, SCORE should bear fruit later this year.

"In addition, we continue to highlight the recent pull-back in fuel (prices) which will provide a tailwind as we go through the year," said analyst Donal O'Nell of Goodbody Stockbrokers.

SCORE was launched last year with a target of boosting operating profit to 2.3 billion euros in 2015, compared with 524 million last year, through 3,500 job cuts, better purchasing and the merger of European short-haul services with discount unit Germanwings.

Lufthansa had on Wednesday warded off the threat of further strike action with a deal agreed with unions which will raise pay by up to 4.7 percent for ground crew and cabin staff.

Lufthansa shares had been trading on 10.1 times estimated 12-months earnings, a discount to Air France-KLM's 16.4 times and ICAG's 16.7, according to StarMine, which weights analysts based on their forecasting track record. ($1 = 0.7580 euros)

(Editing by Christoph Steitz and David Holmes)